Canadian Grain Commission Revolving Fund, Financial statements, March 31, 2018

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, 2018, and all information contained in these statements rests with the management of the Canadian Grain Commission (CGC). These financial statements have been prepared by management in accordance with the reporting requirements of the Receiver General for Canada for revolving funds.

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 department's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in the Commission’s Departmental Results Report is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting 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 department, and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting (ICFR).

An assessment for the year ended March 31, 2018, was completed in accordance with the Policy on Financial Management and the results and action plans are summarized in the annex.

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

The effectiveness and adequacy of the CGC’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the CGC’s operations. It is also reviewed by the Departmental Audit Committee (DAC), which oversees management’s responsibilities for maintaining adequate control systems and the quality of financial reporting. The DAC reviews the results of the annual audit and recommends approval of the financial statements to the Deputy Head of the Canadian Grain Commission.

An independent external auditing firm has expressed an opinion on the fair presentation of the financial statements of the CGC, which does not include an audit opinion on the annual assessment of the effectiveness of the department’s internal controls over financial reporting.

Patti Miller
Deputy Head
Winnipeg,Canada
May 24, 2018
Cheryl Blahey
Chief Financial Officer
Winnipeg, Canada
May 24, 2018

Independent Auditor’s Report

To the Chief Commissioner, Commissioners and the Departmental Audit Committee of Canadian Grain Commission Revolving Fund

We have audited the accompanying financial statements of the Canadian Grain Commission Revolving Fund (“the Fund”), which comprise the statement of financial position as at March 31, 2018, and the statements of operations and net assets, and cash flows for the year then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. These financial statements have been prepared by management of the Fund in accordance with Section 8.1 of the Receiver General for Canada Public Accounts Instructions.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Section 8.1 of the Receiver General for Canada Public Accounts Instructions, and for such internal controls 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 Fund’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 Fund’s internal controls. 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, 2018, and the results of its operations and net assets and its cash flows for the year then ended in accordance with Section 8.1 of the Receiver General for Canada Public Accounts Instructions.

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 8.1 of the Receiver General for Canada Public Accounts Instructions. 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 should not be used by parties other than the Canadian Grain Commission Revolving Fund or the Treasury Board of Canada.

Chartered Professional Accountants, Licensed Public Accountants

Statement of Financial Position

(in thousands of dollars)
Assets 2018 $ 2017 $
Financial Assets
Cash in transit 1 3
Accounts receivable (note 3) 5,656 9,768
Accountable advances 8 5
  5,665 9,768
Non-financial assets
Prepaid expenses 155 220
Tangible capital assets (note 4) 11,031 8,963
  11,186 9,183
  16,851 18,951
(in thousands of dollars)
Liabilities and net assets 2018 $ 2017 $
Current liabilities
Accounts payable and accrued liabilities (note 5) 3,338 3,237
Salaries payable (note 6) 3,014 6,176
Vacation, overtime and compensatory leave payable 1,979 1,728
Deferred revenue 876 835
Employee severance benefits liability (note 7) 2,238 2,516
  11,445 14,492
Net assets (note 9) 5,406 4,459
  16,851 18,951
Contractual obligations (note 10)
Contingent liabilities (note 11)

Statement of operations and net assets

  Quality Assurance Quantity Assurance Grain Quality Research Producer Protection Internal Services 2018 Total 2017 Total
  Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Actual
$
Revenue
Fees and services 45,248 55,604 2,822 3,706 - - - 32 - - 48,070 59,342 70,604
Parliamentary appropriations (note 8) - - - - 4,993 5,660 - - 306 256 5,299 5,916 5,301
Optional services 6,640 3,237 - - 409 599 549 2 - 26 7,598 3,864 5,314
Licensing and producer cars - - - - - - 2,096 1,912 - - 2,096 1,912 1,950
Other revenues - - - - - - - - 20 19 20 19 20
51,888 58,841 2,822 3,706 5,402 6,259 2,645 1,946 326 301 63,083 71,053 83,189
Operating expenses
Personnel 21,679 20,877 1,293 1,185 5,942 4,955 3,673 3,314 13,037 11,458 42,624 41,789 41,607
Rentals 3,434 2,870 41 44 1,310 1,238 73 86 1,623 1,536 6,481 5,774 5,926
Transport and communication 1,694 1,395 120 94 311 319 387 284 1,317 1,141 3,829 3,233 3,363
Professional services 405 261 47 12 371 218 53 23 3,619 2,579 4,495 3,093 2,807
Amortization of tangible capital assets - 971 - 142 - 1,061 - 87 - 360 - 2,621 2,398
Machinery and equipment 1,013 796 19 7 279 352 20 9 410 410 1,741 1,574 1,189
Materials and supplies 695 492 5 2 502 613 104 73 77 118 1,383 1,298 1,072
Repairs and maintenance 209 153 - - 729 753 12 - 129 129 1,079 1,035 684
Information 11 2 - - 44 67 87 81 584 149 726 299 330
Other - 2 - - - 1 - - - 75 - 78 11
Loss (gain) on disposal of tangible assets - - - - - (1) - - - - - (1) 5
29,140 27,819 1,525 1,486 9,448 9,576 4,409 3,957 20,796 17,955 65,358 60,793 59,392
Net results 22,748 31,022 1,297 2,220 (4,086) (3,317) (1,764) (2,011) (20,470) (17,654) (2,275) 10,260 23,797
Net assets, beginning of year 4,459 8,253
Net financial resources used and change in the accumulated net charge against the Fund’s authority, during the year (9,313) (27,591)
Net assets, end of year 5,406 4,459

Statement of Cash Flows

(in thousands of dollars)
Operating activities 2018 $ 2017 $
Net results for the year 10,260 23,797
Items not affecting use of funds
Amortization of tangible capital assets 2,621 2,398
Provision for employee severance benefits (3) 83
Loss (gain) on disposal of tangible capital assets (1) 5
  12,877 26,283
Payment of employee severance benefits (275) (226)
Variations in statement of financial position
Cash in transit 2 81
Accounts receivable 4,104 1,432
Accountable advances (3) 4
Prepaid expenses 65 (101)
Accounts payable and accrued liabilities 101 1,519
Salaries payable (3,162) 2,488
Vacation, overtime and compensatory leave payable 251 (214)
Deferred revenue 41 (117)
Net financial resources provided by operating activities 14,001 31,149
Capital investing activities
Acquisition of tangible capital assets (4,689) (3,576)
Proceeds from disposal of tangible capital assets 1 18
Net financial resources used by capital investing activities (4,688) (3,558)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year 9,313 27,591
Accumulated net charge against the Fund's authority, beginning of year 118,677 91,086
Accumulated net charge against the Fund's authority, end of year 127,990 118,677

Notes to Financial Statements

1. Authority and purpose

The Canadian Grain Commission Revolving Fund (“Canadian Grain Commission”, “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 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, tangible capital acquisitions and temporary financing of accumulated operating deficits and drawdown authority of $2,000,000.

The Canadian Grain Commission did not access its net authority provided from Treasury Board for the fiscal year 2017-2018. The Canadian Grain Commission received a total of $5,958,493 through the Appropriation Acts approved by Parliament for the fiscal year 2017-2018.

Amendments to the Canada Grain Act came into force on August 1, 2013. In response to both legislative changes and restructured fees, the Canadian Grain Commission adjusted its workforce, organizational design, and operations. A revised funding model based on full cost recovery through fees and ongoing appropriations came into effect on August 1, 2013. This sustainable funding model eliminated the Canadian Grain Commission’s dependence on annual ad hoc federal appropriations. Under the updated fee structure up to March 31, 2018, the Canadian Grain Commission accumulated surplus has increased due mainly to higher than expected grain volumes handled. The Canadian Grain Commission updated selected key fees as of August 1, 2017, and updated all fees as of April 1, 2018, as a measure to mitigate the further accumulation of surplus funds.

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 the reporting requirements of the Receiver General for Canada for revolving funds. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles for the public sector because:

  • the net debt indicator and the statement of change in net debt are not presented in the financial statements
  • the liabilities for employee termination benefits and severance liability are based on management’s best estimate rather than actuarial valuations
  • the services received without charge from other government departments and agencies are not reported as expenses and
  • no liability is recorded for sick leave

The significant accounting policies are as follows.

a. Use of estimates
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the periods covered by the financial statements. The principal financial statement components, subject to measurement uncertainty, include salaries payable related to unsettled labour contracts, the estimated useful life of capital assets and the liabilities for employee severance benefits and employee termination benefits. Actual results could differ from those estimates. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
b. Revenue recognition
Revenue is recognized in the accounting period in which it is earned through the provision of goods or services, or when an event giving rise to a claim has taken place. The majority of service fees such as inspection and weighing activities are dependent on grain volumes handled. Revenues that have been received but not yet earned are presented as deferred revenue. Deferred revenue is primarily received for licensing fees which usually covers a 12-month period.
c. Expense recognition
Unless otherwise disclosed, expenses are recorded in the period they are incurred.
Cash in transit includes cash and cheques received prior to March 31 but not deposited until the subsequent year.
e. Parliamentary appropriation
Operations are funded primarily from a permanent authority from Parliament (Revolving Fund) where the Canadian Grain Commission is allowed to spend fees collected. Some of the operations of the Grain Quality Research Program and Internal Audit are funded by ongoing Parliamentary appropriation through their annual votes. These appropriations have been recorded as revenue of the Fund.
f. Accounts receivable
Accounts receivable are stated at amounts expected to be ultimately realized. Allowances are established for all accounts for which interest or principal payments are 180 days past due and deemed uncollectable.
g. Tangible capital assets
Certain assets previously under the custody of the Department of Agriculture and Agri-Food Canada were assumed by the Revolving Fund on April 1, 1995. The assumed assets were considered to be contributed capital and recorded at the Crown's estimated net book value. Assets acquired subsequent to April 1, 1995 were recorded at cost. Proceeds from the disposal of capital assets are retained by the Revolving Fund.
All 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 they are put into service, 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

The costs for assets under construction are capitalized as incurred with amortization commencing in the month after they are put into service.

h. Vacation, overtime and compensatory leave
Vacation, overtime and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
i. Employee severance benefits
Severance benefits accrue to employees over their years of service with the Government of Canada as stipulated in their collective agreements. The Canadian Grain Commission provides for the severance entitlements earned by employees. The obligation relating to the benefits earned by employees is calculated using information derived from management's estimate of the liability.
j. Employee termination benefits
Employees affected by the amendments to the Canada Grain Act and other operational adjustments are entitled to termination benefits, calculated based on salary levels in effect at the time of termination as stipulated in their collective agreements. The obligation is calculated using information derived from management’s estimate of the liability.
k. Pension plan
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. Current legislation does not require the Canadian Grain Commission to make contributions for any actuarial deficiencies of the Public Service Superannuation account.
l. Sick leave
Employees are permitted to accumulate unused sick leave. However, such leave entitlements do not vest and may only be used in the event of illness. Unused sick leave upon employee termination is not payable to the employee. No amount has been accrued in these financial statements and payments of sick leave benefits are included in current operations as incurred.

3. Accounts receivable

(in thousands of dollars)
  2018 $ 2017 $
Other government departments and agencies 181 171
Outside parties 5,473 9,594
  5,661 9,765
Less: Allowance for doubtful accounts from outside parties (5) (5)
  5,656 9,760

4. Tangible capital assets

(in thousands of dollars)
  Cost Accumulated amortization 2018 2017
  Opening Balance $ Acquisitions $ Adjustment $ Disposals $ Closing balance $ Opening balance $ Amortization $ Disposals $ Closing balance $ Net book value $ Net book value $
Scientific equipment 14,743 2,778 - (104) 17,417 11,867 1,327 (104) 13,090 4,327 2,876
Office equipment and furniture 218 3 - - 221 190 6 - 196 25 28
Operational equipment 2,915 119 - - 3,034 1,095 280 - 1,375 1,659 1,820
Motor vehicles 346 23 - - 369 203 57 - 260 109 143
Computer equipment and software 6,921 262 - (20) 7,163 5,926 565 (20) 6,471 692 995
Leasehold improvements 4,510 - 572 - 5,082 3,452 386 - 3,838 1,244 1,058
Assets under construction 2,043 1,504 (572) - 2,975 - - - - 2,975 2,043
  31,696 4,689 - (124) 36,261 22,733 2,621 (124) 25,230 11,031 8,963

Assets under construction consist of leasehold improvements and in house software development.

5. Accounts payable and accrued liabilities

(in thousands of dollars)
  2018 $ 2017 $
Other government departments and agencies 606 1,557
Outside parties 2,732 1,66
Total accounts payable 3,338 3,223
Accrued liabilities - 14
  3,338 3,237

6. Salaries payable

Due to operational adjustments, 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.

(in thousands of dollars)
  2018 $ 2017 $
Employee termination liability - Beginning of year 365 101
Expense for the year 202 261
Benefits paid during the year (184) 3
Employee termination liability - End of year 383 365
Other salary costs including benefits 2,631 5,811
Salaries payable 3,014 6,176

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. The amounts reported are for employees who did not liquidate their severance and will be paid upon their departure from the public service.

(in thousands of dollars)
  2018 $ 2017 $
Employee severance benefits liability - Beginning of year 2,516 2,659
Expense for the year (3) 83
Benefits paid during the year (275) (226)
Employee severance benefits liability - End of year 2,238 2,516

8. Parliamentary 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 is based on accrual accounting. Consequently, items presented in the statement of operations and net assets are not necessarily the same as those provided through appropriations from Parliament. Items recognized in the statement of operations and net assets 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.

Appropriation authorities provided and used.

(in thousands of dollars)
  2018 $ 2017 $
Total appropriation funds provided 5,958 5,418
Frozen Allotment
Underspent (lapsed) (42) (117)
Current year appropriation funds provided and used 5,916 5,301

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 represents the cumulative receipts and disbursements over the life of the Fund.

(in thousands of dollars)
  2018 $ 2017 $
Contributed capital 4,941 4,941
Accumulated surplus
Opening balance 118,195 94,398
Net results 10,260 23,797
Closing balance 128,455 118,195
Accumulated net charge against the Fund’s authority
Opening balance (118,677) (91,086)
Change in net resources provided (9,313) (27,591)
Closing balance (127,990) (118,677)
Total net assets 5,406 4,459

10. Contractual obligations

The Canadian Grain Commission leases its premises primarily under occupancy instruments. An occupancy instrument is a formal agreement between the Canadian Grain Commission and Public Services and Procurement Canada, recording the terms and conditions that govern the provision and occupancy of the accommodation. The Canadian Grain Commission has a total of 18 separate occupancy agreements with various term lengths up to 10 years. In addition, the Canadian Grain Commission has a direct lease agreement with the University of Manitoba for the rental of laboratory and office space.

For the period ended March 31, 2018, the Canadian Grain Commission incurred $5,082,293 in costs associated with its occupancy and lease obligations (2017- $5,186,048). Expected future payouts by fiscal year are as follows.

(in thousands of dollars)
  $
2019 4,749
2020 4,661
2021 4,666
2022 4,381
2023 and thereafter 3,191

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, 2018, two claims are outstanding against the Canadian Grain Commission, as noted below.

Grievances have been filed against the Canadian Grain Commission with respect weekend premiums as stated in a collective agreement. The matters are still to be scheduled for adjudication and the outcome of these claim is not determinable at this time. No accrual for this contingency has been made in the financial statements.

A claim has been filed against the Canadian Grain Commission by grain producers who allege losses sustained in the failure of a former licensee. The claim alleges total losses asserted against the Canadian Grain Commission at $1,723,637, plus interest and costs. The claim is at an early stage of pleadings, and a defence has been filed on behalf of the Canadian Grain Commission. The outcome of the claim cannot be determined at this time. No accrual for this contingency has been made in the financial statements.

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.

Services provided by other government departments

During the year, the Canadian Grain Commission paid occupancy costs and certain professional services to other government departments or agencies. Employer's health insurance plan contributions and employee benefit plans were also provided by and paid to other government departments. Significant services have been recognized in the Canadian Grain Commission statement of operations and net assets as follows.

(in thousands of dollars)
  2018 $ 2017 $
Revenues (733) (808)
Expenses
Employer's contribution to employee benefit plans 8,441 7,717
Occupancy costs 5,092 5,208
Leasehold improvements 1,374 1,772
Professional and special services 1,939 1,597
Other 406 474
Training and education 37 33
Total 16,519 15,960

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

Included in accounts receivable, accounts payable, and salaries payable at year-end are the following amounts with related parties.

(in thousands of dollars)
  2018 $ 2017 $
Accounts receivable 188 171
Accounts payable 606 1,557
Employer’s contribution to employee benefit plans payable 317 962

13. 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 period ended March 31, 2018, six large integrated organizations accounted for $4,419,543 or 84% of the Canadian Grain Commission's outside parties receivable balances (2017 - six organizations, $2,935,564 or 88%).

Unaudited Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting of Canadian Grain Commission Fiscal year 2017-2018

1. Introduction

This document provides unaudited summary information on the measures taken by the Canadian Grain Commission (CGC) to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management, assessment results and related action plans.

Detailed information on the CGC’s authority, mandate, and program activities can be found in the Departmental Results Report and the Departmental Plan

2. Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

The CGC has an established governance and accountability structure to support the assessment efforts and oversight of ICFR. A departmental internal control management framework, approved by the Deputy Head, is in place and includes:

  • Organizational roles and responsibilities as they relate to ICFR to support sound financial management;
  • Activities to ensure that key internal controls are assessed and periodically reassessed using a risk-based approached and that corrective action is taken where necessary; and
  • Regular monitoring of and updates on internal control management, including assessment results and action plans, to the Deputy Head, the Executive Management Committee (EMC) and the Departmental Audit Committee (DAC).

2.2 Service Arrangements Relevant to Financial Statements

The CGC relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows.

Common Arrangements:

  • Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries and the procurement of some goods and services in accordance with the CGC's Delegation of Authority, as well as provides accommodation and travel services;
  • The Treasury Board of Canada Secretariat (TBS) provides the CGC with information used to calculate various accruals and allowances;
  • The Department of Justice provides legal counsel on litigation and advisory services relating to the CGC's legal requirements; and
  • Shared Services Canada provide information technology (IT) infrastructure services to the CGC in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and the CGC.

Specific Arrangements:

  • Agriculture and Agri-Food Canada (AAFC) provides the CGC with a SAP financial platform to report on historical financial transactions and with a Peoplesoft platform to capture and report leave and pay related transactions.
  • TBS provides the CGC with SAP and Cognos Business Intelligence, including the associated system support and technical infrastructure, to capture and report financial transactions.

3. Departmental Assessment Results during Fiscal Year 2017-2018

The key findings and significant adjustments required from the current year’s assessment activities are summarized below.

New or significantly amended key controls:

Changes to key Information Technology General Controls (ITGCs) were required as a result of the implementation of a new departmental financial management system, SAP, and from the implementation of a new government-wide pay system, Phoenix.

Ongoing monitoring program:

As part of its rotational ongoing monitoring plan, the CGC completed its reassessment of ITGCs under departmental management. For the most part, key controls were in place and being performed as intended. The most notable control deficiencies identified indicate the need to:

  • Strengthen logical access controls and user access review processes
  • Adhere to infrastructure change management procedures
  • Update the departmental Disaster Recovery Plan and Business Continuity Plan
  • Perform Threat Risk Assessments and Vulnerability Assessments on some applications
  • Enhance the physical security of the data centre

Remediation strategies to address all control deficiencies will be developed and implemented.

4. Departmental Action Plan

4.1 Progress during Fiscal Year 2017-2018

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year’s rotational plan.

Previous year’s rotational ongoing monitoring plan for current year Status
IT General Controls Completed as planned. Remediation strategies to be developed.
Pay administration Substantially completed; to be completed in 2018-19.
Financial reporting Substantially completed; to be completed in 2018-19.
Revenue Substantially completed; to be completed in 2018-19.

4.2 Status and Action Plan for the Next Fiscal Year and Subsequent Years

The CGC’s rotational on-going monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table:

Key Control Areas Fiscal 2018-19 Fiscal 2019-20 Fiscal 2020-21
Entity level controls No Yes No
IT general controls under departmental management No No Yes
Purchase to Pay No Yes No
Capital assets Yes No No
Pay Administration Yes No Yes
Financial Reporting Yes No Yes
Revenues Yes No Yes

In addition to planned on-going monitoring activities, regular follow-up on past remediation plans will be performed.