Canadian Grain Commission Revolving Fund, Financial statements, March 31, 2019

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, 2019, 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, 2019, 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
Chief Commissioner and Deputy Head
Winnipeg,Canada
May 23, 2019
Cheryl Blahey
Chief Financial Officer
Winnipeg, Canada
May 23, 2019

Independent Auditor’s Report

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

Our opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Canadian Grain Commission Revolving Fund (the CGC Revolving Fund) as at March 31, 2019 and its financial performance and its cash flows for the year then ended in accordance with Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada.

What we have audited

The CGC Revolving Fund financial statements comprise:

  • the statement of financial position as at March 31, 2019;
  • the statement of operations and net assets for the year then ended;
  • the statement of cash flows for the year then ended; and
  • the notes to the financial statements, which comprise a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the CGC Revolving Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Emphasis of matter – basis of accounting and restriction on use

We draw attention to note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the CGC Revolving Fund to meet the requirements of Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the management of the CGC Revolving Fund and should not be used by parties other than the CGC Revolving Fund and the Treasury Board of Canada. Our opinion is not modified in respect of this matter.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada 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.

In preparing the financial statements, management is responsible for assessing the CGC Revolving Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the CGC Revolving Fund or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the CGC Revolving Fund’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit 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 CGC Revolving Fund’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the CGC Revolving Fund’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the CGC Revolving Fund to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Chartered Professional Accountants, Licensed Public Accountants

Ottawa, Ontario
May 24, 2019

Statement of Financial Position

(in thousands of dollars)
Assets 2019 $ 2018 $
Financial Assets
Cash in transit - 1
Accounts receivable (note 3) 6,029 5,656
Accountable advances 7 8
  6,036 5,665
Non-financial assets
Prepaid expenses 353 155
Tangible capital assets (note 4) 11,603 11,031
  11,956 11,186
  17,992 16,851
(in thousands of dollars)
Liabilities and net assets 2019 $ 2018 $
Current liabilities
Accounts payable and accrued liabilities (note 5) 1,708 3,338
Salaries payable (note 6) 3,866 3,014
Vacation, overtime and compensatory leave payable 2,051 1,979
Deferred revenue 861 876
Employee severance benefits liability (note 7) 1,909 2,238
  10,395 11,445
Net assets (note 9) 7,597 5,406
  17,992 16,851
Contractual obligations (note 10)
Contingent liabilities (note 11)

Statement of operations and net assets

  Grain Regulation Internal Services 2019 Total 2018 Total
  Planned Results
$
Actual
$
Planned Results
$
Actual
$
Planned Results
$
Actual
$
Actual
$
Revenue
Fees and services 50,317 58,123 - - 50,317 58,123 59,342
Parliamentary appropriations (note 8) 5,262 5,464 245 318 5,507 5,782 5,916
Optional services 2,310 2,196 - 27 2,310 2,223 3,864
Licensing and producer cars 2,110 1,859 - - 2,110 1,859 1,912
Other revenues - - 20 21 20 21 19
59,999 67,642 265 366 60,264 68,008 71,053
Operating expenses
Personnel 32,172 32,015 12,879 12,400 45,051 44,415 41,789
Rentals 4,095 3,924 2,001 1,841 6,096 5,765 5,774
Transport and communication 2,209 2,137 1,544 1,148 3,753 3,285 3,233
Amortization of tangible capital assets 2,298 2,416 354 452 2,652 2,868 2,621
Professional services 829 447 3,649 2,340 4,478 2,787 3,093
Materials and supplies 1,834 1,495 115 184 1,949 1,679 1,298
Machinery and equipment 626 843 501 344 1,127 1,187 1,574
Repairs and maintenance 1,118 786 181 132 1,299 918 1,035
Information 107 128 771 143 878 271 299
Other - 3 100 59 100 62 78
Loss (gain) on disposal of tangible assets - 8 - - - 8 (1)
45,288 44,202 22,095 19,043 67,383 63,245 60,793
Net results 14,711 23,440 (21,830) (18,677) (7,119) 4,763 10,260
Net assets, beginning of year 5,406 4,459
Net financial resources used and change in the accumulated net charge against the Fund’s authority, during the year (2,572) (9,313)
Net assets, end of year 7,597 5,406

Statement of Cash Flows

(in thousands of dollars)
Operating activities 2019 $ 2018 $
Net results for the year 4,763 10,260
Items not affecting use of funds
Amortization of tangible capital assets 2,868 2,621
Provision for employee severance benefits 10 (3)
Loss (gain) on disposal of tangible capital assets 8 (1)
  7,649 12,877
Payment of employee severance benefits (339) (275)
Variations in statement of financial position
Cash in transit 1 2
Accounts receivable (373) 4,104
Accountable advances 1 (3)
Prepaid expenses (198) 65
Accounts payable and accrued liabilities (1,630) 101
Salaries payable 852 (3,162)
Vacation, overtime and compensatory leave payable 72 251
Deferred revenue (15) 41
Net financial resources provided by operating activities 6,020 14,001
Capital investing activities
Acquisition of tangible capital assets (3,466) (4,689)
Proceeds from disposal of tangible capital assets 18 1
Net financial resources used by capital investing activities (3,448) (4,688)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year 2,572 9,313
Accumulated net charge against the Fund's authority, beginning of year 127,990 118,677
Accumulated net charge against the Fund's authority, end of year 130,562 127,990

Notes to Financial Statements

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 CGC’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.

To achieve its mandate effectively, the CGC implemented the Departmental Results Framework (“DRF”) and Program Inventory (“PI”), as required by the Treasury Board Policy on Results, effective April 1, 2018. The CGC’s core responsibility is Grain Regulation: to regulate grain handling in Canada and establish and maintain science based standards for Canadian grain. Internal Services supports this core responsibility. Through the DRF and PI, the CGC has three programs for the fiscal year ended March 31, 2019. In the financial statements for the year ended March 31, 2018, CGC’s Program Activity Architecture had four programs disclosed in the statement of operations in addition to Internal Services.

The CGC 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 CGC did not access its net authority provided from Treasury Board for the fiscal year ended March 31, 2019. The CGC received a total of $5,811,187 through the Appropriation Acts approved by Parliament for the fiscal year 2018-2019 (2018 – $5,958,493).

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 CGC’s dependence on annual ad hoc federal appropriations. Under the updated fee structure, the CGC accumulated surplus is mainly due to higher than expected grain volumes handled. In response, following the 2017 User Fees Consultation and Pre-Proposal Notification, the CGC reduced fees for official grain inspection and official grain weighing services by 24 % as at August 1, 2017. The remaining fees were updated as at April 1, 2018.

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

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 tangible 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. Planned results
Planned results for the fiscal year ended March 31, 2019 disclosed in the statement of operations were based on revenues and expenses as per CGC’s 2018-19 Departmental Plan and include adjustments subsequent to its preparation.
c. 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.
d. Expense recognition
Unless otherwise disclosed, expenses are recorded in the period they are incurred.
e. Cash in transit
Cash in transit includes cash and cheques received prior to March 31 but not deposited until the subsequent year.
f. Parliamentary appropriation
Operations are funded primarily from a permanent authority from Parliament (Revolving Fund) where the CGC is allowed to spend fees collected. Some of the operations of the Grain 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.
g. 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.
h. 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.

i. Vacation, overtime and compensatory leave
Vacation, overtime and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
j. 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 CGC 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.
k. 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.
l. Pension plan
Employees of the CGC 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 CGC to make contributions for any actuarial deficiencies of the Public Service Superannuation account.
m. 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 on 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)
  2019 $ 2018 $
Other government departments and agencies 148 188
Outside parties 5,886 5,473
  6,034 5,661
Less: Allowance for doubtful accounts from outside parties (5) (5)
  6,029 5,656

4. Tangible capital assets

(in thousands of dollars)
  Cost Accumulated amortization 2019 2018
  Opening Balance $ Acquisitions $ Adjustment $ Disposals $ Closing balance $ Opening balance $ Amortization $ Disposals $ Closing balance $ Net book value $ Net book value $
Scientific equipment 17,417 1,056 - (463) 18,010 13,090 1,414 (463) 14,041 3,969 4,327
Office equipment and furniture 221 - - - 221 196 6 - 202 19 25
Operational equipment 3,034 - - (39) 2,995 1,375 278 (21) 1,632 1,363 1,659
Motor vehicles 369 49 - (24) 394 260 55 (24) 291 103 109
Computer equipment and software 7,163 230 134 (236) 7,291 6,471 499 (236) 6,734 557 692
Leasehold improvements 5,082 - 2,414 - 7,496 3,838 616 - 4,454 3,042 1,244
Assets under construction 2,975 2,131 (2,548) (8) 2,550 - - - - 2,550 2,975
  36,261 3,466 - (770) 38,957 25,230 2,868 (744) 27,354 11,603 11,031

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

5. Accounts payable and accrued liabilities

(in thousands of dollars)
  2019 $ 2018 $
Other government departments and agencies 407 606
Outside parties 1,261 2,732
Total accounts payable 1,668 3,338
Accrued liabilities 40 -
  1,708 3,338

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)
  2019 $ 2018 $
Employee termination liability, beginning of year 383 365
Expense for the year - 202
Benefits paid during the year (339) (184)
Employee termination liability, end of year 44 383
Other salary costs including benefits 3,822 2,631
Salaries payable 3,866 3,014

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 CGC 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 on their departure from the public service.

(in thousands of dollars)
  2019 $ 2018 $
Employee severance benefits liability, beginning of year 2,238 2,516
(Expense) recovery for the year 10 (3)
Benefits paid during the year (339) (275)
Employee severance benefits liability - End of year 1,909 2,238

8. Parliamentary appropriation

The CGC is financed by the Government of Canada through a combination of an ongoing Parliamentary appropriation, authority to respend 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 CGC 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)
  2019 $ 2018 $
Total appropriation funds provided 5,811 5,958
Lapse (29) (42)
Current year appropriation funds provided and used 5,782 5,916

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)
  2019 $ 2018 $
Contributed capital 4,941 4,941
Accumulated surplus
Opening balance 128,455 118,195
Net results 4,763 10,260
Closing balance 133,218 128,455
Accumulated net charge against the Fund’s authority
Opening balance (127,990) (118,677)
Change in net resources provided (2,572) (9,313)
Closing balance (130,562) (127,990)
Total net assets 7,597 5,406

10. Contractual obligations

The CGC leases its premises primarily under occupancy instruments. An occupancy instrument is a formal agreement between the CGC and Public Services and Procurement Canada, recording the terms and conditions that govern the provision and occupancy of the accommodation. The CGC has a total of 17 separate occupancy agreements (2018 – 18) with various term lengths up to 10 years. In addition, the CGC has a direct lease agreement with the University of Manitoba for the rental of laboratory and office space.

For the year ended March 31, 2019, the CGC incurred $5,105,926 in costs associated with its occupancy and lease obligations (2018 – $5,082,293). Expected future payouts by fiscal year are as follows.

(in thousands of dollars)
  $
2020 4,792
2021 4,742
2022 4,417
2023 754
2024 and thereafter 2,503

11. Contingent liabilities

In the normal course of its operations, the CGC may become involved in various legal actions and grievances with financial implications. 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, 2019, three claims are outstanding against the CGC, as noted below.

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

A grievance has also been filed against the CGC with regard to place of work. An accrual has been made in the financial statements for $40,000 with respect to this grievance.

A claim has been filed against the CGC by grain producers who allege losses sustained in the failure of a former licensee. The claim alleges total losses asserted against the CGC 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 CGC. 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 CGC is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The CGC 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 CGC 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 CGC statement of operations and net assets as follows.

(in thousands of dollars)
  2019 $ 2018 $
Revenues (669) (733)
Expenses
Employer's contribution to employee benefit plans 8,251 8,441
Occupancy costs 5,126 5,092
Leasehold improvements 1,739 1,374
Professional and special services 1,870 1,939
Other 415 406
Total 16,732 16,519

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

(in thousands of dollars)
  2019 $ 2018 $
Accounts receivable 148 188
Accounts payable 410 606
Employer’s contribution to employee benefit plans payable 656 317

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 CGC to concentrations of credit risk consist primarily of trade accounts receivable. For the year ended March 31, 2019, six large integrated organizations accounted for $4,551,676 or 83% of the CGC’s outside parties receivable balances (2018 – six organizations, $4,419,543 or 84%).

Unaudited Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting of Canadian Grain Commission Fiscal year 2018-2019

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 2018-2019

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

New or significantly amended key controls:

Significant amendments to key controls within the Pay Administration process were required as a result of the implementation of the government-wide pay system, Phoenix, and the implementation of a new departmental financial management system.

Ongoing monitoring program:

As part of its rotational ongoing monitoring plan, the CGC completed its reassessment of financial controls within the following business processes: capital assets, pay administration, financial reporting and revenue. For the most part, key controls were in place and being performed as intended. However, significant control issues were identified within the pay administration and revenue processes relating to:

  • Review of pay transactions and post-payment verifications
  • Segregation of duties
  • Documentation of pay approval procedures
  • System access
  • Validation of revenues

The above controls issues are a result of significant changes to CGC ‘s control environment, including changes in staff, processes and systems.

Remediation strategies to address all control deficiencies have been developed and are in varying stages of implementation.

4. Departmental Action Plan

4.1 Progress during Fiscal Year 2018-2019

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
Capital Assets Completed as planned. Remedial actions are substantially completed.
Pay administration Initiated in 2017-18 and completed in 2018-19. Remedial actions are in varying stages of completion.
Financial reporting Initiated in 2017-18 and completed in 2018-19. Remedial actions are in varying stages of completion.
Revenue Initiated in 2017-18 and completed in 2018-19. Remedial actions are in varying stages of completion.

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 2019-20 Fiscal 2020-21 Fiscal 2021-22
Entity level controls No Yes No
IT general controls under departmental management No No Yes
Purchase to Pay No Yes No
Capital assets No No No
Pay Administration No No Yes
Financial Reporting No No Yes
Revenues No No No

Given other management priorities, no reassessments are planned for 2019-20. The department will focus on the implementation of past remediation plans.

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