Canadian Grain Commission Revolving Fund, Financial statements, March 31, 2016

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, 2016, 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 Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

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 Performance 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).

In accordance with the Policy on Internal Control, internal control activities for the year ended March 31, 2016 are summarized in the annex along with future action plans.

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 annual audit and recommends approval of the financial statements to the Chief Commissioner 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.

Jim Smolik
Acting Deputy Head
Winnipeg, Canada
May 25, 2016
Cheryl Blahey
Chief Financial Officer
Winnipeg, Canada
May 25, 2016

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, which comprise the statement of financial position as at March 31, 2016 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 to meet the requirements of Section 6.4 of the Treasury Board of Canada’s Special Revenue Spending Authorities.

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 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 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 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, 2016 and the results of its operations and net assets 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.

Chartered Professional Accountants, Licensed Public Accountants

Statement of Financial Position

(in thousands of dollars)
Assets 2016 $ 2015 $
Financial Assets
Cash in transit 84 807
Accounts receivable (note 3) 11,192 8,718
Accountable advances 9 7
11,285 9,532
Non-financial assets
Prepaid expenses 119 268
Tangible capital assets (note 4)
At cost 28,443 31,728
Less: accumulated amortization (20,635) (23,369)
7,927 8,627
19,212 18,159
(in thousands of dollars)
Liabilities and net assets 2016 $ 2015 $
Current liabilities
Accounts payable and accrued liabilities (note 5) 1,718 1,767
Salaries payable (note 6) 3,688 3,821
Vacation, overtime and compensatory leave payable 1,942 1,854
Deferred revenue 952 830
Current portion of employee severance benefits liability (note 7) 220 346
8,520 8,618
Long-term liabilities
Employee severance benefits liability (note 7) 2,439 2,781
10,959 11,399
Net assets (note 9) 8,253 6,760
19,212 18,159
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 2016 Total 2015 Total
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Budget
$
Actual
$
Actual
$
Revenue
Service fees 46,672 69,190 3,721 6,150 - 1 533 265 20 84 50,946 75,690 73,858
Parliamentary appropriations (note 8) - - - - 5,230 5,230 - - 245 245 5,475 5,475 5,475
License fees and producer cars - - - - - - 1,928 1,940 - - 1,928 1,940 1,969
Contract revenue 728 852 - - 410 525 - - - 16 1,138 1,393 1,607
Special appropriations (note 8) - - - - - - - - - 137 - 137 815
Employee termination benefit appropriations (note 8) - - - - - - - - - - - - 1,201
47,400 70,042 3,721 6,150 5,640 5,756 2,461 2,205 265 482 59,487 84,635 84,925
Expenses
Salaries and employee benefits 21,750 20,179 1,491 754 4,969 4,350 2,952 2,669 10,736 10,130 41,898 38,082 38,614
Occupancy costs 2,984 2,697 57 57 1,441 1,290 325 280 752 1,075 5,559 5,399 5,345
Travel 1,771 1,403 245 163 377 281 164 139 798 689 3,355 2,675 2,381
Repairs and supplies 972 749 14 9 1,408 1,275 137 77 880 816 3,411 2,926 2,953
Amortization of tangible capital assets 1,054 887 73 - 952 872 53 10 972 687 3,104 2,456 2,603
Professional and special services 191 107 7 - 290 226 6 10 2,410 2,135 2,904 2,478 1,512
Communications 22 17 - - 6 8 16 55 922 754 966 834 874
Postage and courier 271 229 - - 100 18 5 90 131 144 507 481 481
Loss (gain) on disposal of tangible capital assets - - - - - (9) - - - 3 - (6) 280
Other expenses 272 3 - - - - - 2 22 2 294 7 -
29,287 26,271 1,887 983 9,543 8,311 3,658 3,332 17,623 16,435 61,998 55,332 55,043
Net results 18,113 43,771 1,834 5,167 (3,903) (2,555) (1,197) (1,127) (17,358) (15,953) (2,511) 29,303 29,882
Net assets, beginning of year 6,760 5,645
Transfer of the transition payments for implementing salary payments in arrears (note 13) (8) (1,093)
Net financial resources used and change in the accumulated net charge against the Fund’s authority, during the year (27,802) (27,674)
Net assets, end of year 8,253 6,760

Statement of Cash Flows

(in thousands of dollars)
Operating activities 2016 $ 2015 $
Net results for the year 29,303 29,882
Items not affecting use of funds
Amortization of tangible capital assets 2,456 2,603
Provision for employee severance benefits - (67)
Loss (gain) on disposal of tangible capital assets (6) 264
31,753 32,682
Payment of employee severance benefits (468) (2,523)
Transition payments for implementing salary payments in arrears (8) (1,093)
Variations in statement of financial position
Cash in transit 723 (313)
Accounts receivable (2,474) 903
Accountable advances (2) 1
Prepaid expenses 149 109
Accounts payable and accrued liabilities (50) 571
Salaries payable (133) 497
Vacation, overtime and compensatory leave payable 89 (44)
Deferred revenue 122 227
Net financial resources provided by operating activities 29,701 31,017
Capital investing activities
Acquisition of tangible capital assets (1,907) (3,343)
Proceeds from disposal of tangible capital assets 8 -
Net financial resources used by capital investing activities (1,899) (3,343)
Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year 27,802 27,674
Accumulated net charge against the Fund's authority, beginning of year 63,284 35,610
Accumulated net charge against the Fund's authority, end of year 91,086 63,284

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, regulate grain handling in Canada and to ensure a dependable commodity for domestic and export markets.

In order to effectively pursue its mandate, the CGC 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 CGC’s Program Alignment Architecture has five programs: Quality Assurance Program, Quantity Assurance Program, Grain Quality Research Program, and Producer Protection Program. Each contributes to making progress to the sole strategic outcome. The Internal Services program supports all other programs within the CGC.

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 CGC did not request to access its net authority provided from Treasury Board. The CGC received a total of $5,612,526 through the Appropriation Acts approved by Parliament for the fiscal year 2015-2016.

Amendments to the Canada Grain Act came into force on August 1, 2013. In response to both legislative changes and restructured user fees, the CGC adjusted its workforce (note 6), organizational design, and operations. A revised funding model also came into effect on August 1, 2013 that is based on full cost recovery through user fees and ongoing appropriations. Until the implementation of this model, the CGC was funded through its ongoing appropriations, fees collected and special appropriation.

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 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.

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 vacation, 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.
d. Cash in transit
Cash in transit includes cash and cheques received prior to March 31 but not deposited until the subsequent year.
e. Parliamentary and employee termination benefit 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 Quality Research Program and Internal Audit are funded by ongoing Parliamentary appropriation through their annual votes. Special appropriations were also received to cover affected employees’ termination benefits. 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.
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 (terms of the leases)

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 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.
j. Employee termination benefits
Employees affected by the amendments to the Canada Grain Act 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 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.
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)
2016 $ 2015 $
Other government departments and agencies 41 292
Outside parties 11,156 8,426
11,197 8,718
Less: Allowance for doubtful accounts from outside parties (5) -
11,192 8,718

4. Tangible capital assets

(in thousands of dollars)
Cost Accumulated amortization 2016 2015
Opening Balance $ Acquisitions $ Disposals $ Closing balance $ Opening balance $ Amortization $ Disposals $ Closing balance $ Net book value $ Net book value $
Scientific equipment 16,563 306 (2,622) 14,247 12,231 1,255 (2,622) 10,864 3,383 4,332
Office equipment and furniture 304 - (114) 190 304 - (114) 190 - -
Operational equipment 2,205 374 - 2,579 679 209 - 888 1,691 1,526
Motor vehicles 323 42 (21) 344 161 50 (21) 190 154 162
Computer equipment and software 5,689 647 (224) 6,112 4,974 590 (224) 5,340 772 715
Leasehold improvements 6,054 19 (2,211) 3,862 5,020 352 (2,209) 3,163 699 1,034
Assets under construction 590 519 - 1,109 - - - - 1,109 590
31,728 1,907 (5,192) 28,443 23,369 2,456 (5,190) 20,635 7,808 8,359

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

5. Accounts payable and accrued liabilities

(in thousands of dollars)
2016 $ 2015 $
Other government departments and agencies 1,065 519
Outside parties 503 1,248
Security payment 150 -
1,718 1,767

6. Salaries payable

With the legislative changes to the Canada Grain Act, a segment of the CGC work force became eligible for the provision of termination benefits. As a result, the CGC 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.

(in thousands of dollars)
2016 $ 2015 $
Employee termination liability - Beginning of year 1,162 1,666
Expense for the year (608) 715
Benefits paid during the year (453) (1,219)
Employee termination liability - End of year 101 1,162
Other salary costs including benefits 3,587 2,659
Salaries payable 3,688 3,821

7. Employee severance benefits liability

The CGC 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. Employees were given the option to liquidate immediately or collect upon departure from the public service.

(in thousands of dollars)
2016 $ 2015 $
Employee termination liability - Beginning of year 3,127 5,717
Expense for the year - (67)
Benefits paid during the year (468) (2,523)
Employee severance benefits liability - End of year 2,659 3,127
Current portion of employee severance benefits liability (220) (346)
Long-term portion of employee severance benefits liability 2,439 2,781

8. Parliamentary, special and employee termination benefits appropriation

The CGC 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 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)
2016 $ 2015 $
Total appropriation funds provided 5,719 9,262
Frozen Allotment (107) -
Employee termination benefits:
Frozen allotment (lapsed) - (10)
Under-spent (lapsed) - (1,761)
Current year appropriation funds provided and used 5,612 7,491

Total current year appropriation funds provided and used by type consists of:

(in thousands of dollars)
2016 $ 2015 $
Special appropriation 137 815
Employee termination benefits appropriation - 1,201
Parliamentary appropriation 5,475 5,475
Current year appropriation funds provided and used 5,612 7,491

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)
2016 $ 2015 $
Contributed capital 4,941 4,941
Accumulated surplus
Opening balance 65,103 36,314
Net results 29,303 29,882
Transfer of the transition payments from implementing salary payments in arrears (8) (1,093)
Closing balance 94,398 65,103
Accumulated net charge against the Fund’s authority
Opening balance (63,284) (35,610)
Change in net resources provided (27,802) (27,674)
Closing balance (91,086) (63,284)
Total net assets 8,253 6,760

10. Contractual obligations

CGC leases its premises 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. CGC has a total of 15 separate occupancy agreements with various term lengths. Expected future payouts are as follows.

(in thousands of dollars)
$
2017 4,748
2018 3,943
2019 3,749
2020 3,790
2021 and thereafter 7,460

11. Contingent liabilities

In the normal course of its operations, CGC 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, 2016, one claim is outstanding against CGC, as noted below.

Grievances have been filed against the CGC 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.

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)
2016 $ 2015 $
Employer's contribution to employee benefit plans 7,390 7,475
Occupancy costs 4,925 5,094
Professional and special services
Audit and accounting services 615 25
Consulting services 152 99
Legal services 315 367
Translation services 237 252
Others 55 116
13,689 13,428

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

(in thousands of dollars)
2016 $ 2015 $
Accounts receivable 41 292
Accounts payable 1,065 519
Employer’s contribution to employee benefit plans payable 644 680

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 CGC to concentrations of credit risk consist primarily of trade accounts receivable. For the year ended March 31, 2016, six large integrated organizations accounted for $5,183,527 or 93% of the CGC's outside parties receivable balances (2015 - six organizations, $3,768,507 or 89%).

15. Comparative information

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

Unaudited Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting of Canadian Grain Commission Fiscal year 2015-2016

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 Performance Report and the Report on Plans and Priorities

2. Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

The CGC has an established governance and accountability structure which sets the “tone from the top” for effectively managing and supporting departmental 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 services;
  • The Treasury Board of Canada Secretariat 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 capture and report financial transactions and with a Peoplesoft platform to capture and report leave and pay related transactions. As a result, reliance is placed on the control procedures of AAFC.

3. Departmental Assessment Results during Fiscal Year 2015-2016

All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.

4. Departmental Action Plan

4.1 Progress during Fiscal Year 2015-2016

Below is a summary of the progress made by the Department based on the plans identified in the previous fiscal year’s annex:

Previous year’s rotational ongoing monitoring plan for current year Status
Entity level controls All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.
Capital assets All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.
Pay administration All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.
Financial reporting All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.
Revenue All ICFR activities were rescheduled to subsequent years to allow resources to be allocated to the implementation of a new departmental financial management system effective April 1, 2016 and other organizational priorities.

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 2016-17 Fiscal 2017-18 Fiscal 2018-19
Entity level controls Yes No No
IT general controls under departmental management No Yes No
Purchase to Pay No No Yes
Capital assets No Yes No
Pay Administration Yes Yes Yes
Financial Reporting Yes Yes Yes
Revenues Yes Yes Yes

In accordance with CGC’s On-Going Monitoring Plan, processes and sub-processes will be assessed over a three-year cycle, with high and medium ranked processes being assessed more frequently than low ranked processes.

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

Date modified: