Future-oriented statement of operations (unaudited) 2015–16

Notes to the Future-Oriented Statement of Operations (unaudited)

Income statement
For the year ending March 31 (dollars)
  Quality Assurance Quantity Assurance Grain Quality Research Producer Protection Internal Services 2015–16 Total 2014–15 Total
Service Fees 30,665,359 1,752,902 2,207,576 3,563,722 16,872,785 55,062,344 71,583,866
Appropriations 0 0 5,230,177 0 245,000 5,475,177 9,252,440
Total Revenue 30,665,359 1,752,902 7,437,753 3,563,722 17,117,785 60,537,521 80,836,306
Salaries 21,376,567 1,215,502 5,157,508 2,471,167 11,869,864 42,090,608 39,109,023
Operational travel 1,034,926 59,159 251,017 120,272 577,709 2,043,083 1,897,680
Rent 2,829,107 161,718 686,188 328,780 1,579,242 5,585,035 5,187,558
Amortization 874,117 0 1,132,490 62,808 1,180,130 3,249,545 2,841,699
Other operating costs 3,383,816 193,427 820,730 393,244 1,888,888 6,680,105 6,204,694
Total Expenses 29,498,533 1,629,806 8,047,933 3,376,271 17,095,833 59,648,376 55,240,654
Net Surplus 1,166,826 123,096 (610,180) 187,451 21,952 889,145 25,595,652

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

Service fees allocations are based on anticipated costs.

1. Authority and Objectives

The Canadian Grain Commission was established in 1912 and is the federal government agency responsible for administering the provisions of the Canada Grain Act [“CGA”].

The Canadian Grain Commission’s mandate as set out in the Canada Grain Act is to, “in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets.”

The Canadian Grain Commission’s vision is to be “To be a world class, science-based quality assurance provider.” The Canadian Grain Commission reports to Parliament through the Minister of Agriculture and Agri-Food.

In order to effectively pursue its mandate, the Canadian Grain Commission aims to achieve the following strategic outcome: Canada’s grain is safe, reliable and marketable and Canadian grain producers are properly compensated for grain deliveries to licensed grain companies.

The Canadian Grain Commission’s Program Alignment Architecture has five programs that each contribute to making progress to the sole strategic outcome. The programs are:

  • Quality Assurance Program,
  • Quantity Assurance Program,
  • Grain Quality Research Program,
  • Producer Protection Program, and
  • Internal Services.

In accordance with the Government’s policy on self-insurance, the Canadian Grain Commission does not carry its own insurance. The Canadian Grain Commission is not subject to income tax.

2. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and departmental plans as described in the Report on Plans and Priorities.

The information in the estimated results for fiscal year 2014-15 is based on actual results as at November 30, 2014 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2015-16 fiscal year.

The main assumptions underlying the forecasts are as follows:

  • Fiscal year 2015-16 is the first full year of the transformed Canadian Grain Commission as a result of changes to the Canada Grain Act. Fiscal year 2014-15 includes revenues related to Canadian Grain Commission transformation. Fiscal year 2015-16 reflects revenues and expenditures at the Canadian Grain Commission’s sustainable funding structure on the basis of the Canadian Grain Commission’s business plan. The department’s services to be provided in 2015-16 remain substantially the same as 2014-15;
  • Service fees were established using the annual average grain volume of 23.3 million tonnes which is based on a 5 year historical average grain volume projection.
  • Fee revenue for 2015-16 is forecasted at the annual average grain volume.   2014-15 service fee revenue reflects grain volumes handled from the 2014 crop production and 2013 record crop carry over. As of November 30, 2014 for 2014-15 forecasted grain volumes are 35.3 million tonnes; and
  • The Canadian Grain Commission is currently working to assess its needs for infrastructure renewal to ensure the viability of the Canadian Grain Commission. This includes the assessment at various Canadian Grain Commission offices at terminal elevators as well as the renewal of the Grain Research Laboratory.

These assumptions are adopted as at November 30, 2014.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2014-15 and for 2015-16, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations, the Canadian Grain Commission 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 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 statement of operations and the historical statement of operations include the following:

  • Economic conditions in relation to grain volumes may affect both the amount of revenue earned and the collectability of accounts receivable;
  • Further changes to the operating budget through additional new initiatives or technical adjustments later in the year;
  • The timing and amounts of acquisitions, disposals of property, plant and equipment and timing of leasehold improvements may affect gains/losses and amortization expense; and
  • Implementation of new collective agreements.

Once the Report on Plans and Priorities is presented, the Canadian Grain Commission will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future oriented statement of operations has been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat which are consistent with Canadian generally accepted accounting principles for the public sector.

The significant accounting policies are as follows:

  1. Measurement uncertainty

    The preparation of this future-oriented statement of operations in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts.

    The principal future-oriented statement of operations components subject to measurement uncertainty include salaries related to unsettled labour contracts, the useful life of tangible capital assets, the variability of annual grain volumes which can fluctuate up to 20 percent from year-to-year resulting in variable revenue from fees, and expenses for employee vacation, severance benefits and employee termination benefits. Actual results could differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the future-oriented statement of operations in the year they become known.
  2. Revenues

    Revenues are presented on an accrual basis and are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues:
    • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year;
    • Revenues that have been received where the Canadian Grain Commission has an obligation to other parties for the provision of goods, services or the use of assets in the future are considered as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred. Deferred revenue is primarily for licensing fees which usually cover a 12-month period; and
    • Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenues takes place.
  3. Expenses

    Expenses are presented on an accrual basis:
    • Expenses for the Canadian Grain Commission’s operations are recorded when goods are received or services are rendered, including services provided without charge for worker’s compensation, which are recorded as expenses at its estimated cost;
    • Vacation pay and compensatory leave are accrued and expenses are recorded as the benefits are earned by employees under their respective terms of employment;
    • Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, to the extent the future event is likely to occur and a reasonable estimate can be made; and
    • Expenses also include amortization of tangible capital assets, which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset.
  4. Employee future benefits

    • Employee severance benefits are accrued and expensed as the benefits are earned by employees as stipulated in their collective agreements. These benefits are currently funded through a monthly salary accrual based on a calculation of the actual severance liability owed per employee;
    • Employees of the Canadian Grain Commission are covered by the Public Service Superannuation Act and the Supplementary Retirement Benefits Act. The Government of Canada's portion of the pension cost is included in the employee benefit charge assessed against the Revolving Fund. The actual payment of the pension is made from the Public Service Superannuation and Supplementary Retirement Benefits Accounts; and
    • Current legislation does not require the Canadian Grain Commission to make contributions for any actuarial deficiencies of the Public Service Superannuation account.
  5. Tangible capital assets

    All tangible capital assets and leasehold improvements with a cost equal to or greater than $10,000 are capitalized at their acquisition cost.

    Assets are amortized on a straight-line basis over their estimated useful lives, commencing in the month after acquisition, as follows:
    • Scientific equipment: 5 years
    • Office equipment and furniture: 5 years
    • Operational equipment: 10 years
    • Motor vehicles: 5 years
    • Computer equipment and software: 3 years
    • Leasehold improvements: 5 years (term of the lease)
5. Parliamentary Appropriations

The Canadian Grain Commission is financed by the Government of Canada through a combination of an ongoing Parliamentary appropriation, authority to re-spend fees collected, accumulated surpluses from prior years and a revolving line of credit of $2 million. The Canadian Grain Commission has not drawn on its line of credit since 2003-04.

The ongoing Parliamentary appropriation received for the Grain Quality Research program and Internal Audit expenditures have been recognized as revenue of the Fund. The government funding basis is used to recognize transactions affecting Parliamentary appropriations. The future-oriented statement of operations is based on accrual accounting. Consequently, items presented in the future-oriented statement of operations are not necessarily the same as those provided through appropriations from Parliament.

Items recognized in the future-oriented statement of operations in one year may be funded through Parliamentary authorities in prior, current, or future years. Accordingly, the Canadian Grain Commission has different net cost 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 the total expenses to requested authorities:
  Planned 2016
(in thousands of dollars)
Estimated 2015
(in thousands of dollars)
Total expenses (accrual basis) 59,648 55,241
Less:
Adjustments for items affecting total expenses but not affecting authorities:
Amortization of tangible capital assets 3,250 2,842
Increase in employee future benefits   155
Others (prepaid, deferred revenue, etc.)   (896)
  3,250 2,101
Add:
Adjustments for items not affecting total expenses but affecting authorities:
Amortization of tangible capital assets 4,251 4,900
Employee future benefits   2,331
Employee Termination Benefit   745
Others (WFA Operating)   110
  4,251 8,086
Total expenses (cash basis) 60,649 61,226
Other Adjustments (112) (107)
Projected revolving fund surplus   21,168
Total Authorities 60,537 82,287
b) Authorities requested:
  Planned 2016
(in thousands of dollars)
Estimated 2015
(in thousands of dollars)
Authorities
Program Expenditure - Vote 30 4,884 8,362
Statutory
Contributions to employee benefit plan 591 900
Revenue Credited to Vote 55,062 67,178
Access to Accumulated Revolving Fund Surplus - 7,947
  55,653 76,025
Total Authorities received 60,537 84,387
Lapsed Fund   (2,090)
Frozen allotment   (10)
Total Authorities Available 60,537 82,287

Authorities for the years ending March 31, 2015 and March 31, 2016 include amounts presented in the Main Estimates, Supplementary Estimates (A) and (B), planned for presentation in Supplementary Estimates (C), estimates of amounts to be allocated at year-end from Treasury Board central votes and other authorities provided by Treasury Board.