Canadian Grain Commission Revolving Fund, Financial statements, March 31, 2015

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Section 6.4 of the Treasury Board of Canada’s Policy on Special Revenue Spending Authorities, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Canadian Grain Commission Revolving Fund as at March 31, 2015 and the results of its operations and its cash flows for the year then ended in accordance with Section 6.4 of the Treasury Board of Canada’s Policy on Special Revenue Spending Authorities.

Basis of accounting and restriction on use

Without modifying our opinion, we draw attention to note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Canadian Grain Commission Revolving Fund to meet the requirements of Section 6.4 of the Treasury Board of Canada’s Policy on Special Revenue Spending Authorities. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the management of the Canadian Grain Commission Revolving Fund and the Treasury Board of Canada and should not be used by parties other than the Canadian Grain Commission Revolving Fund or the Treasury Board of Canada.

PricewaterhouseCoopers LLP

Chartered Professional Accountants, Licensed Public Accountants

Approved by:

Elwin Hermanson
Chief Commissioner

Cheryl Blahey
Chief Financial Officer

1. Authority and purpose

The Canadian Grain Commission Revolving Fund ("CGC", "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, regulate grain handling in Canada and 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, the total of which cannot exceed $2,000,000 at any time.

The Canadian Grain Commission received authorization from Treasury Board to access its net authority provided for a total amount up to $7,946,483 in fiscal year 2014-2015 to allow payments for severance obligations that have been expensed in previous years.

In the fall of 2012, two initiatives were announced that have impacted the services and organizational structure of the Canadian Grain Commission. Firstly, Bill C-45, containing proposed amendments to the Canada Grain Act, was introduced in Parliament. Secondly, on November 1, 2012, the Canadian Grain Commission launched consultations on Canadian Grain Commission user fees that reflected an updated Canada Grain Act and streamlined Canadian Grain Commission operations. Bill C-45 received Royal Assent on December 14, 2012. The amendments to the Canada Grain Act came into force on August 1, 2013. Updated user fees took effect August 1, 2013, concurrent with changes to the Canada Grain Act. In response to both the legislative changes and restructured user fees, the Canadian Grain Commission has adjusted its workforce (note 6), organizational design, and operations.

The revised funding model which came into effect on August 1, 2013, is based on full cost recovery through user fees and ongoing appropriations. Until the implementation of this model, the Canadian Grain Commission was funded through its ongoing appropriations, fees collected and special appropriation.

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. Significant accounting policies

The financial statements have been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat and the reporting requirements of the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles because.

• The liabilities for employee termination benefits and severance liability and are based on management's best estimate rather than actuarial valuations; and
• The services received without charge from other government departments and agencies are not reported as expenses.

The significant accounting policies are as follows.

3. Accounts receivable

4. Capital assets

5. Accounts payable and accrued liabilities

6. Salaries payable

With the legislative changes to the Canada Grain Act, a segment of the Canadian Grain Commission work force became eligible for the provision of termination benefits. As a result, the Canadian Grain Commission has recorded an obligation for termination benefits as part of salaries payable to reflect the estimated workforce adjustment costs. As the changes were implemented, employees received their termination benefits and there is a portion of these benefits payable in future years.

7. Employee severance benefits liability

The Canadian Grain Commission provides severance benefits to its employees based on eligibility, years of service and final salary. These benefits are currently calculated based on the actual severance owed to each employee.

With Budget 2011, the Government of Canada announced its intention to eliminate the ongoing accumulation of severance benefits. All collective agreements for the Canadian Grain Commission have been negotiated and severance benefits have ceased to accumulate. Employees were given the option to liquidate immediately or collect upon departure from the public service.

8. Parliamentary, special and employee termination benefits appropriation

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 government funding basis is used to recognize transactions affecting Parliamentary appropriations. The statement of operations and net assets (liabilities) is based on accrual accounting. Consequently, items presented in the statement of operations and net assets (liabilities) are not necessarily the same as those provided through appropriations from Parliament. Items recognized in the statement of operations and net assets (liabilities) in one year may be funded through Parliamentary authorities in prior, current, or future years. Accordingly, the Canadian Grain Commission has different appropriation authorities for the year on a government funding basis than on an accrual accounting basis. Details on appropriation authorities provided and used are shown in the following tables.

9. Net assets

Contributed capital represents the value of capital assets financed from capital contributions at the inception of the Fund.

The accumulated surplus is the accumulation of each fiscal year's surplus net of deficits since the inception of the Fund.

The accumulated net charge against the Fund's authority is the amount of the Revolving Fund's non-lapsing authority that has been accumulated since its inception.

10. Contractual obligations

The Canadian Grain Commission leases its premises under occupancy instruments. An occupancy instrument is a formal agreement between the Canadian Grain Commission and Public Works and Government Services Canada recording the terms and conditions that govern the provision and occupancy of the accommodation. Expected future payouts are as follows.

11. Contingent liabilities

In the normal course of its operations, the Canadian Grain Commission may become involved in various legal actions. Some of these potential liabilities 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 is recorded in the financial statements. As at March 31, 2015, there are no claims outstanding against the Canadian Grain Commission.

12. Related party transactions

The Canadian Grain Commission is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Canadian Grain Commission enters into transactions with these entities at arm's length in the normal course of business and on normal trade terms.

13. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-15. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay process. This change to the pay system had no impact on the expenses of the Revolving Fund. However, it did result in the use of authorities by the Revolving Fund and impacted the accumulated net charge against the Fund’s authority (ANCAFA). Prior to year-end, transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

14. Financial instruments

The Revolving Fund's financial instruments consist of cash in transit, accounts receivable, accounts payable and accrued liabilities, salaries payable, vacation, overtime and compensatory leave payable, and employee severance benefits. The carrying values of these financial instruments approximate their fair value because of their short terms to maturity, except for employee severance benefits and employee termination benefits which are based on management's best estimate. Unless otherwise noted, it is management's opinion that the Revolving Fund is not exposed to significant interest, currency or credit risk arising from these financial instruments.

Financial instruments that potentially subject the Canadian Grain Commission to concentrations of credit risk consist primarily of trade accounts receivable. For the year ended March 31, 2015, six large integrated organizations accounted for $3,768,507 or 89% of the Canadian Grain Commission's outside parties receivable balances (2014 – eight organizations, $3,975,128 or 89%).

15. Comparative information

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