Future-oriented statement of operations (unaudited) 2016–17

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 2016–17 Total 2015–16 Total
Salaries 19,404,542 1,279,980 6,537,828 2,579,604 11,592,402 41,394,356 39,310,565
Operational travel 1,067,013 70,896 362,120 142,880 642,085 2,284,994 2,169,167
Rent 2,639,105 175,351 895,653 353,394 1,588,107 5,651,610 5,365,128
Amortization 1,109,873 0 1,072,903 10,432 911,392 3,104,600 2,694,878
Other operating costs 3,839,866 255,134 1,303,164 514,184 2,310,677 8,223,025 7,806,197
Total Expenses 28,060,398 1,781,362 10,171,668 3,600,494 17,044,663 60,658,585 57,345,935
Service Fees 28,835,016 1,915,901 4,649,034 3,861,205 17,106,752 56,367,908 68,215,537
Total Revenue 28,835,016 1,915,901 4,649,034 3,861,205 17,106,752 56,367,908 68,215,537
Net cost of operations before government funding and transfers (774,618) (134,539) 5,522,634 (260,711) (62,089) 4,290,677 (10,689,602)

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

Service fees allocations are based on anticipated costs.

The Canadian Grain Commission receives annually approximately $5 million of appropriation that is not included in the revenue for the public benefit of Grain Quality Research program and Internal Audit.

The statements is based on accrual basis accounting refer to note 4.

1. Authority and purpose

The Canadian Grain Commission Revolving Fund (“the Revolving Fund” or “the Fund”) derives its authority from the Canada Grain Act. The Canadian Grain Commission's mandate, as set out in the Act, is to, “in the interest of 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.”

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. The Quality Assurance Program, Quantity Assurance Program, Grain Quality Research Program, and Producer Protection Program each contribute to making progress to the sole strategic outcome. The Internal Services Program supports all other programs within the Canadian Grain Commission.

The Canadian Grain Commission Revolving Fund was established under Appropriation Act No. 6, 1994-1995.  The Fund has a continuing non-lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for working capital, capital acquisitions and temporary financing of accumulated operating deficits and draw down authority of $2,000,000.

The Canadian Grain Commission has not sought authorization from Treasury Board to access its net authority provided for 2016-17.

From fiscal year 2012-13 to fiscal year 2015-16, the Canadian Grain Commission has transformed itself into a streamlined and financially sustainable organization. Funding for fiscal years 2015-16 and 2016-17 includes a combination of an ongoing appropriation and authority to re-spend revenues collected from fees. Forecasted spending for 2015-16 and planned spending for fiscal years 2016-17 is based on operations under an amended CGA and updated user fees. The Canadian Grain Commission now recovers approximately 91% of its costs through user fees and no longer requires annual ad hoc funding.

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 estimated results for fiscal year 2015-16 are based on actual results as at November 30, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-17 fiscal year.

The main assumptions underlying the forecasts are as follows:

  • Fiscal year 2016-17 is the second full year of the transformed Canadian Grain Commission as a result of changes to the Canada Grain Act. Fiscal year 2016-17 reflects revenues and expenditures at the Canadian Grain Commission’s sustainable funding structure on the basis of the Canadian Grain Commission’s 2016-17 Report on Plans and Priorities. The department’s services to be provided in 2016-17 remain substantially the same as 2015-16;
  • Service fees for 2016-17 were established based on annual average grain volumes of 23.4 million metric tonnes. This is based on a 5 year historical average grain volume projection.
  • 2015-16 forecasted revenues are based on 34.2 million metric tonnes due to higher grain volumes handled; 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, 2015.

3. Variations and changes to the forecast financial information

While every attempt has been made to forecast final results for the remainder of 2015-16 and for 2016-17, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material due to a number of factors, including environmental conditions.

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 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. 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 $2,000,000. 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 will be 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 2017
(In thousands of dollars)
Estimated 2016
(In thousands of dollars)
Total expenses (accrual basis) 60,659 57,346
Less:
Adjustments for items affecting total expenses but not affecting authorities:
Amortization of tangible capital assets 3, 105 2,695
Services provided without charge 140 148
Others (prepaid, deferred revenue, etc.) 0 598
  3,245 3,441
Add:
Adjustments for items not affecting total expenses but affecting authorities:
Acquisitions of tangible capital assets 4,336 3,246
Employee future benefits 0 393
Employee Termination Benefit 0 409
Others (Retro, Advance, Prepaid, etc.) 0 400
  4,336 4,448
Total expenses (cash basis) 61,750 58,353
Projected revolving fund surplus 0 12,029
Total Authorities available for use 61,750 70,382
b) Authorities requested:
  Planned 2017
(in thousands of dollars)
Estimated 2016
(in thousands of dollars)
Authorities
Program Expenditure - Vote 1 4,776 4,884
Program Expenditure - Vote 25   244
Statutory
Contributions to employee benefit plan 606 591
Revenue Credited to Vote 56,368 64,770
Total Authorities received 61,750 70,489
Frozen allotment   (107)
Total Authorities Available 61,750 70,382

Authorities for the years ending March 31, 2016 and March 31, 2017 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.