Future-Oriented Financial Statements - March 2016

1.0 Future-Oriented Statement of Operations

Department of Veterans Affairs
Future-Oriented Statement of Operations (unaudited)
For the year ended March 31
(in thousands of dollars)

	Forecasted Results 2015-2016	Planned Results 2016-2017
Expenses
Disability and Death Compensation	$2,163,447	$2,144,291
Financial Support Program	247,485	277,427
Health Care Program and Re-establishment Services	1,066,636	1,064,526
Canada Remembers Program	47,939	47,798
Veterans Ombudsman	5,462	5,857
Internal Services	90,246	77,099
Expenses incurred on behalf of Government	(1,671)	(1,671)
Total expenses	3,619,544	3,615,327
Revenues
Hospital Services	18,800	0
Meals	500	0
Other	3,200	3,200
Revenues earned on behalf of Government	(22,500)	(3,200)
Total revenues	0	0
Net cost of operations before government funding and transfers	$3,619,544	$3,615,327

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

2.0 Notes to Future-oriented Statements of Operations (unaudited) For the year ended March 31

2.1 Authority and Objectives

The Department of Veterans Affairs was established by the Department of Veterans Affairs Act as a department under Schedule I to the Financial Administration Act.

The Veterans Affairs Portfolio consists of the Department of Veterans Affairs which reports to the Minister of Veterans Affairs and the Office of the Veterans Ombudsman which reports to Parliament through the Minister of Veterans Affairs.

Veterans Affairs Canada objectives as stated in the Department of Veterans Affairs Act are the care, treatment or re-establishment in civil life of any person who served in the Canadian Forces or merchant navy or in the naval, army or air forces or merchant navies of Her Majesty, of any person who has otherwise engaged in pursuits relating to war, and of any other person designated by the Governor in Council, and the care of the dependants or survivors of any person previously referred to herein.

The Department meets its responsibilities through its various programs. The Canada Remembers Program endeavours to keep alive the achievements and sacrifices made by those who have served Canada in times of war and peace. The Veterans Health Care and Re-establishment program provides treatment and other health-related benefits to Veterans and other eligible persons. The Disability and Death Compensation program provides pensions or awards for disability or death, and the Financial Support Program provides economic support in the form of allowances to Veterans and other eligible persons. The Office of the Veterans Ombudsman provides Veterans with an opportunity to raise awareness of their needs and concerns, and bring their issues to the attention of the Department. The Internal Services activity represents groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of the organization.

2.2 Methodology and Underlying Assumptions

The future-oriented financial statements have been prepared on the basis of the government priorities and the plans of the department as described in the Report on Plans and Priorities.

The information in the forecast results for fiscal year 2015-16 is based on actual results as at December 31, 2015. Forecasts have been made for planned results for the 2016-17 fiscal year.

The main assumptions underlying the forecasts are as follows:

• the future-oriented financial information was finalized on the basis of government policies, government priorities, and external environment at the time.
• the requirements of Treasury Board Accounting Policies which are based on Canadian generally accepted accounting principles for the public sector were utilized.
• the resources provided will enable Veterans Affairs Canada to deliver the expected results specified in the Report on Plans and Priorities.
• historical costs were used.

These assumptions are adopted as at December 31, 2015.

2.3 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.

In preparing this future-oriented statement of operations, Veterans Affairs Canada 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:

1. The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
2. Implementation of new collective agreements.
3. Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
4. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, Veterans Affairs Canada 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.

2.4 Summary of Significant Accounting Policies

The future-oriented statement of operations has been prepared using Government’s accounting policies in effect for 2015-16 fiscal year, 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:

(a) Net cash provided by Government
 

Veterans Affairs Canada operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by Veterans Affairs Canada is deposited to the CRF and all cash disbursements made by Veterans Affairs Canada are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.
 

(b) Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.
 

Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.

Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

Revenues that are non-respendable are not available to discharge the Department’s liabilities. While the deputy head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity’s gross revenues.
 

(c) Forecasted expenses are recorded on the accrual basis:
 

• Grants are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the grant program. In case of grants which do not form part of an existing program, the expense is recognized when the government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment received parliamentary approval prior to the completion of the financial statements.
   
• Contributions are recognized in the year in which the recipient has fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
   
• 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.
   
• Services provided without charge by other government departments for accommodations, the employer’s contribution to the health and dental insurance plans, legal services and workers’ compensation are recorded as operating expenses at their estimated cost.
   

(d) Benefit payments
 

The majority of the programs administered by Veterans Affairs Canada are meant to provide future benefits for members and Veterans of the Canadian Forces. As such, an actuarially determined liability and related disclosure for these future benefits are presented in the financial statements of the Government of Canada, the ultimate sponsor of these benefits. This differs from the accounting and disclosures of benefits presented in these future-oriented statement of operations as Veterans Affairs Canada expenses these benefits as they become due and record no accruals for future benefits. Payments of benefits made directly to beneficiaries, such as pensions and allowances for disability, death and economic support, are recorded as grants or contributions, while benefits delivered through service providers, such as certain health care benefits are recorded as operating expenses. This accounting treatment corresponds to the funding provided to the Department through parliamentary authorities.

2.5 Parliamentary Authorities

Veterans Affairs Canada is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to Veterans Affairs Canada do not parallel financial reporting according to generally accepted accounting principles because authorities are primarily based on cash flow requirements. 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 Department 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) Authorities Requested

	Forecasted Results 2015-2016	Planned Results 2016-2017
	(in thousands of dollars)
Vote 1 - Operating expenditures	$833,415	$870,519
Vote 5 - Grants and Contributions	2,712,863	2,725,592
Statutory amounts	40,763	32,171
Requested Authorities	$3,587,041	$3,628,282

(b) Reconciliation of net cost of operations to current year Appropriations

	Forecasted Results 2015-2016	Planned Results 2016-2017
	(in thousands of dollars)
Net cost of operations before governemnt funding and transfers	3,619,544	3,615,327
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments	(38,748)	(37,779)
(Increase) Decrease employee future benefits	(477)	3,242
Amortization of tangible capital assests	(5,778)	(808)
Refunds of previous years' expenditures	12,500	12,500
Decrease Ste Annes Hospital Transfer liability	0	35,800
Total	3,587,041	3,628,282
Adjustment for items not affecting net cost of operations but affecting authorities:	0	0
Requested authorities	$3,587,041	$3,628,282

2.6 Related Party Transactions

Veterans Affairs Canada is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. Veterans Affairs Canada enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, Veterans Affairs Canada received services which were obtained without charge from other Government departments as presented in part (a).

• Common services provided without charge by other Government departments:

During the year, Veterans Affairs Canada received services without charge from other departments, relating to accommodations, legal fees and employer’s contribution to the health and dental insurance plans and workers’ compensation.

These services without charge have been recognized on the Department’s Future-oriented Statement of Operations and Departmental Net Financial Position as follows:

	Forecasted Results 2015-2016	Planned Results 2016-2017
	(in thousands of dollars)
Accommodations	$19,374	$19,374
Employer's contribution to the health and dental insurance plans	18,183	17,242
Legal services	797	789
Workers' compensation	394	374
Total	$38,748	$37,779

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in the Department's Statement of Operations.