Annual Financial Statements 2013-14

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, 2014 and all information contained in these statements rests with the management of the Military Police Complaints Commission (MPCC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

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 MPCC’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the MPCC’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 (ICFR) 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 MPCC; and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

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

The MPCC is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to comply with the Treasury Board Policy on Internal Control.

A Core Control Audit was performed in 2011-12 by the Office of the Comptroller General of Canada (OCG) on the transactions in 2010-11. The Audit Report and related Management Action Plan are posted on the MPCC’s web site at: (http://www.mpcc-cppm.gc.ca/05/1300/1300-eng.aspx).

The financial statements of the MPCC have not been audited.


[Original signed by]
________________________
Glenn M. Stannard, O.O.M., Chairperson
Signed in Ottawa, Canada


[Original signed by]
____________________________
Sylvain Roy, Chief Financial Officer
Signed in Ottawa, Canada

Statement of Financial Position (Unaudited)

As at March 31
(in dollars)
  2014 2013
Liabilities
Accounts payable and accrued liabilities (note 4) $427,159 $246,059
Vacation pay and compensatory leave 84,264 61,804
Employee future benefits (note 5) - 138,764
Total liabilities 511,423 446,627
Financial assets
Due from the Consolidated Revenue Fund 394,688 230,348
Accounts receivable and advances (note 6) 33,095 26,089
Total financial assets 427,783 256,437
Departmental net debt 83,640 190,190
Non-financial assets
Tangible capital assets (note 7) 120,668 71,428
Total non-financial assets 120,688 71,428
Departmental net financial position $37,028 ($118,762)

Contractual obligations (note 8)

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


[Original signed by]
________________________
Glenn Stannard, Chairperson
Signed in Ottawa, Canada


[Original signed by]
____________________________
Sylvain Roy, Chief Financial Officer
Signed in Ottawa, Canada

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the year ended March 31
(in dollars)
  2014 Planned Results 2014 2013
Expenses
Complaints Resolution Program $4,369,743 $3,403,212 $3,201,733
Internal Services 1,467,789 2,127,212 2,169,723
Net cost of operations before government funding 5,837,532 5,530,424 5,371,456
Government funding
Net cash provided by Government 5,606,988 5,342,266 5,675,562
Services provided without charge by other government departments (note 9) 168,354 179,608 174,040
Change in due from the Consolidated Revenue Fund 14,311 164,340 (451,120)
Net cost of operations after government funding 47,879 (155,790) (27,026)
Departmental net financial position - Beginning of year 289,740 (118,762) (145,788)
Departmental net financial position - End of year $241,861 $37,028 $(118,762)

Segmented information (note 10)

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

Statement of Change in Departmental Net Debt (Unaudited)

For the year ended March 31
(in dollars)
  2014 Planned Results 2014 2013
Net cost of operations after government funding $47,879 ($155,790) $(27,026)
Change due to tangible capital assets
Acquisition of tangible capital assets 61,920 38,252 8,765
Adjustment of tangible capital assets - 22,930 -
Amortization of tangible capital assets (84,388) (11,942) (58,215)
Total change due to tangible capital assets (22,468) 49,240 (49,450)
Net increase (decrease) in departmental net debt 25,411 (106,550) (76,476)
Departmental net debt - Beginning of year (71,212) 190,190 266,666
Departmental net debt - End of year ($45,801) $83,640 $190,190

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

Statement of Cash Flow (Unaudited)

For the year ended March 31
(in dollars)
  2014 2013
Operating Activities
Net cost of operations before government funding $5,530,424 $5,371,456
Non-cash items:
Services provided without charge by other government departments (note 9) (179,608) (174,040)
Amortization of tangible capital assets (11,942) (58,215)
Adjustment of tangible capital asset 22,930 -
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances 7,006 (48,434)
(Increase) decrease in accounts payable and accrued liabilities (181,100) 481,643
(Increase) in vacation pay and compensatory leave (22,460) (6,224)
Decrease in employee future benefits 138,764 100,612
Cash used in operating activities 5,304,014 5,666,797
Capital investing Activities
Acquisition of tangible capital assets 38,252 8,765
Cash used by capital investing activities 38,252 8,765
Net Cash Provided by Government of Canada $5,342,266 $5,675,562

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

Notes to the Financial Statements (Unaudited)
For the year ended March 31, 2014

1. Authority and Objectives

The Military Police Complaints Commission (MPCC) is a quasi-judicial agency, which reports to Parliament through the Minister of National Defence. It is a civilian body, external and independent of the Department of National Defence (DND) and the Canadian Armed Forces (CAF). The MPCC was established in the fall of 1999 under Part IV of the National Defence Act (Sections 250.1 to 250.53). Its mandate is to monitor and review complaints about the conduct of the military police in performance of their policing duties or functions and to deal with complaints of interference in military police investigations.

2. Summary of Significant Accounting Policies

These financial statements have been prepared using the Government's accounting policies stated below, 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) Parliamentary Authorities

The MPCC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the MPCC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2013-14 Report on Plans and Priorities.

(b) Net Cash Provided by Government

The MPCC operates within the Consolidated Revenue Fund (CRF) which is administered by the Receiver General for Canada. All cash received by the MPCC is deposited to the CRF and all cash disbursements made by the MPCC 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 Government.

(c) Due from the Consolidated Revenue Fund

Amounts due to or from the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the MPCC is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Expenses

Expenses are recorded on the accrual basis.

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

Services provided without charge by other government departments and agencies for employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(e) Employee Future Benefits

i. Pension Benefits

Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The MPCC’s contributions to the Plan are charged to expenses in the year incurred and represent its total obligation to the Plan. The MPCC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

ii. Severance Benefits

Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(f) Accounts Receivable and Advances

Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(g) Tangible Capital Assets

All tangible capital assets having an initial cost of $3,000 or more are recorded at their acquisition cost. The MPCC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset Class Amortization Period
Informatics hardware 3 years
Software 3 years
Equipment 3-5 years
Leasehold improvements 10 years

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(h) Measurement Uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for employee future benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Authorities

The MPCC receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the MPCC has different net results 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) Reconciliation of Net Cost of Operations to Current Year Authorities Used

(in dollars) 2014 2013
Net cost of operations before government funding $5,530,424 $5,371,456
Adjustments for items affecting net cost of operations but not affecting authorities
Services provided without charge by other government departments (179,608) (174,040)
Amortization of tangible capital assets (11,942) (58,215)
Decrease in employee future benefits 138,764 135,888
Increase in vacation pay and compensatory leave (22,460) 318
Adjustment of tangible capital asset 22,930 -
Adjustment of previous year’s payables at year-end 2,118 -
Refunds of prior year's expenditures 1,727 23,860
Total items affecting net cost of operations but not affecting authorities 5,481,953 5,292,724
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisition of tangible capital assets 38,252 8,765
Current year authorities used $5,520,205 $5,301,489

(b) Authorities Provided and Used

(in dollars) 2014 2013
Authorities provided
Vote 25 - Operating expenditures $10,883,288 8,514,793
Statutory amounts 360,410 305,593
  11,243,698 8,820,386
Less: authorities available for future years - (4)
Less: lapsed operating (5,723,493) (3,518,893)
Current year authorities used $5,520,205 $5,301,489

4. Accounts Payable and Accrued Liabilities

The following table presents details of the MPCC’s accounts payable and accrued liabilities:

(in dollars) 2014 2013
Accounts payable - Other government departments and agencies $41,707 $5,894
Accounts payable - External suppliers 313,592 142,953
Total accounts payable 355,299 148,847
Accrued liabilities 71,860 97,212
Total accounts payable and accrued liabilities $427,159 $246,059

5. Employee Future Benefits

(a) Pension benefits

The MPCC’s employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the MPCC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2013–2014 expense amounts to $253,401 ($218,171 in 2012–2013). For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012–2103) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012–2013) the employee contributions.

The MPCC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The MPCC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or to collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

(in dollars) 2014 2013
Accrued benefit obligation, beginning of the year $138,764 $239,376
Expense for the year (116,672) $(78,520)
Benefits paid during the year (22,092) (22,092)
Accrued benefit obligation, end of the year $ - $138,764

6. Accounts Receivable and Advances

The following table presents details of accounts receivable and advances balances:

(in dollars) 2014 2013
Receivables from other government departments and agencies $32,595 $25,589
Petty cash advance 500 500
Total accounts receivable and advances $33,095 $26,089

7. Tangible Capital Assets

(in dollars)

Capital Asset Class Cost
Opening Balance Acquisitions Adjustments Closing Balance
Informatics hardware $333,857 $38,252 $ - $372,109
Software 53,574 - - 53,574
Equipment 193,442 - - 193,442
Leasehold improvements 140,999 - - 140,999
Assets under construction - - 22,930 22,930
Total $721,872 $38,252 $22,930 $783,054

  Accumulated Amortization
Opening Balance Amortization Closing Balance
Informatics hardware $355,214 ($17,283) $337,931
Software 40,090 12,459 52,549
Equipment 189,755 1,932 191,687
Leasehold improvements 65,385 14,834 80,219
Assets under construction - - -
Total $650,444 $11,942 $662,386

  Net Book Value
2014 2013
Informatics hardware $34,178 $(21,357)
Software 1,025 13,484
Equipment 1,755 3,687
Leasehold improvements 60,780 75,614
Assets under construction 22,930 -
Total $120,668 $71,428

8. Contractual Obligations

The nature of the MPCC’s activities can result in some large multi-year contracts and obligations whereby the MPCC will be obligated to make future payments when the goods and services are received. The most significant commitment relates to an operating lease for its accommodation. Contractual obligations that can be reasonably estimated are summarized as follows:

  2014-15 2015-16 2016-17 2017-18 Total
Operating leases $344,055 $344,055 $344,055 $57,344 $1,089,509

The occupancy instrument governing the rental of MPCC space expires May 31, 2017.

9. Related Party Transactions

The MPCC is related as a result of common ownership to all government departments, agencies and Crown Corporations. The MPCC enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the MPCC received common services which were obtained without charge from other government departments and agencies as disclosed below.

(a) Common Services Provided Without Charge by Other Government Departments

During the year, the MPCC received services without charge from a common service organization related to the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the MPCC's Statement of Operations and Departmental Net Financial Position as follows:

(in dollars) 2014 2013
Employer's contribution to the health and dental insurance plans $179,608 $174,040

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 cost of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada are not included in the MPCC's Statement of Operations and Departmental Net Financial Position.

(b) Other Transactions with Related Parties

(in dollars) 2014 2013
Expenses - Other government departments and agencies $1,151,919 $1,032,549

Expenses disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

10. Segmented Information

Presentation by segment is based on MPCC’s Program Alignment Architecture. The presentation by segment is based on the same accounting policies as described in the Summary of Significant Accounting Policies in note 2. The following table presents the expenses incurred for the main programs, by major object of expenses. The segment results for the period are as follows:

(in dollars) Complaints
Resolution
Internal Services Total
2014 2013
Operating expenses
Salaries and employee benefits $1,513,072 $1,075,632 $2,588,704 $2,299,231
Professional and special services 1,737,883 519,131 2,257,014 2,223,891
Accommodation and other rentals 5,055 369,453 374,508 424,565
Transportation and telecommunication 93,520 69,715 163,235 250,340
Office expenses and equipment 39,388 76,553 115,941 89,273
Communication, printing and publishing 14,294 4,279 18,573 23,967
Amortization of tangible capital assets - 11,942 11,942 58,215
Repairs - 507 507 1,974
Net cost of operations before government funding $3,403,212 $2,127,212 $5,530,424 $5,371,456

11. Restatement of Comparative Information

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

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