Departmental Financial Statements 2016-2017

1.0 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, 2017 and all information contained in these statements rests with the management of Veterans Affairs Canada. 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 judgement, 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 Veterans Affairs’ financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Veterans Affairs’ 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; organizational arrangements that provide appropriate divisions of responsibility; communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout Veterans Affairs; and 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 ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2017 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of Veterans Affairs’ system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department’s operations, and by the Departmental Audit Committee, which oversees management’s responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister of Veterans Affairs Canada.

The financial statements of Veterans Affairs Canada have not been audited.

W.J. Natynczyk
General (Retired)
Deputy Minister
Charlottetown, Canada

Elizabeth M. Stuart,
Rear-Admiral (Retired)
Chief Financial Officer
Charlottetown, Canada

2.0 Statement of Financial Position (unaudited)

Department of Veterans Affairs
Statement of Financial Position (unaudited)
as of March 31
(in thousands of dollars)

	2017	2016
Liabilities
Accounts payable and accrued liabilities (Note 4)	112,600	120,582
Vacation pay and compensatory leave	7,099	6,869
Deferred revenue	450	450
Employee future benefits (Note 5)	11,669	20,292
Garnishments and Family Orders	4	11
Contingent liability (Note 10)	1,242	3,072
Ste. Anne's Hospital transfer liability (Note 6)	18,550	64,440
Other liabilities (Note 7)	7,322	6,070
Total gross liabilities	158,936	221,786
Liabilities held on behalf of Government
Deferred revenue	(450)	(450)
Total liabilities held on behalf of Government	(450)	(450)
Total liabilities	158,486	221,336
Financial assets
Due from the consolidated Revenue Fund	104,300	111,903
Accounts receivable (Note 8)	34,946	27,396
Total gross financial assets	139,246	139,299
Financial assets held on behalf of Government
Accounts receivable and advances (Note 8)	0	0
Total financial assets held on behalf of Government	0	0
Total financial assets	139,246	139,299
Departmental net debt	19,240	82,037
Non-financial assets
Tangible capital assets (Note 9)	13,554	9,225
Total non-financial assets	13,554	9,225
Departmental net financial position	(5,686)	(72,812)

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

W.J. Natynczyk
General (Retired)
Deputy Minister
Charlottetown, Canada

Elizabeth M. Stuart
Rear-Admiral (Retired)
Chief Financial Officer
Charlottetown, Canada

3.0 Statement of Operations and Departmental Net Financial Position (unaudited)

Statement of Operations and Departmental Net Financial Position (unaudited)
For the year ended March 31
(in thousands of dollars)

	2017 Planned results	2017	2016
Expenses
Disability and Death Compensation	2,144,291	2,111,654	2,147,933
Financial Support Program	277,427	359,568	242,779
Health Care Program and Re-establishment Services	1,064,526	1,111,188	1,089,179
Canada Remembers Program	47,798	56,126	49,089
Veterans Ombudsman	5,857	5,044	5,191
Internal Services	77,099	75,994	91,774
Expenses incurred on behalf of Government	(1,671)	(2,368)	(3,263)
Total expenses	3,615,327	3,717,206	3,622,682
Revenues
Hospital Services	0	28	14,881
Meals	0	0	333
Sale of goods and information products	0	5	13
Other	3,200	988	1,224
Revenues earned on behalf of Government	(3,200)	(1,004)	(16,428)
Total revenues	0	17	23
Net cost from continuing operations	3,615,327	3,717,189	3,622,659
Transferred operations
Expenses		0	0
Net cost of transferred operations		0	0
Net cost of operations before government funding and transfers		3,717,189	3,622,659
Government funding and transfers
Net cash provided by Government		3,753,545	3,528,228
Change in due from Consolidated Revenue Fund		(7,603)	49,213
Services provided without charge by other government departments (Note 11)		38,373	40,553
Transfer of transition payments for implementing salary payments in arrears		0	(54)
Transfer of assets and liabilities to other government departments (Note 12)		0	(1)
Net cost of operations after government funding and transfers		(67,126)	4,720
Departmental net financial position - Beginning of year		(72,812)	(68,092)
Departmental net financial position - End of Year Segmented information (Note 13)		(5,686)	(72,812)

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

4.0 Statement of Change in Departmental Net Debt (unaudited)

Statement of Change in Departmental Net Debt (unaudited)
For the year ended March 31
(in thousands of dollars)

	2017	2016
Net cost of operations after government funding and transfers	(67,125)	4,720
Change due to tangible capital assets
Acquisitions of tangible capital assets	246	317
Amortization of tangible capital assets	(915)	(5,775)
Expense of tangible capital assets adjustment	4,998	2,616
Loss on writedown of capital assets	0	(1)
Transfer to other government departments	0	(1)
Total change due to tangible capital assets	4,329	(2,844)
Change due to prepaid expenses	0	0
Net increase (decrease) in departmental net debt	(62,796)	1,876
Departmental net debt - Beginning of year	82,037	80,161
Departmental net debt - End of year	19,241	82,037

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

5.0 Statement of Cash Flows (unaudited)

Statement of Cash Flows (unaudited)
For the year ended March 31
(in thousands of dollars)

	2017	2016
Operating activities
Net cost of operations before government funding and transfers	3,717,189	3,622,659
Non-cash items:
Amortization of tangible capital assets	(915)	(5,775)
Gain on disposal of tangible capital assets	0	0
Services provided without charge by other government departments (Note 11)	(38,373)	(40,553)
Transition payments for implementing salary payments in arrears	0	54
Loss on writedown of capital assets	0	(1)
Variations in Statement of Financial Position
Increase in accounts receivable and advances	7,530	10,240
Increase (decrease) in cash	20	(13)
Decrease (increase) in accounts payable and accrued liabilities	7,982	(58,691)
Decrease (increase) in vacation pay and compensatory leave	(230)	1,007
Decrease (increase) in future employee benefits	8,623	(82)
Decrease (increase) in contingent liability (Note 10)	1,830	(1,845)
Decrease Ste Anne's Hospital transfer liability	45,890	481
Increase in other liabilities	(1,245)	(2,186)
Cash used for operating activities	3,748,301	3,525,295
Capital investment activities
Acquisitions of tangible capital assets (Note 9)	246	317
Proceeds from disposal of tangible capital assets	0	0
Adjustments to tangible capital assets (Note 9)	4,998	2,616
Cash used for capital investment activities	5,244	2,933
Financing activities	0	0
Net cash provided by Government of Canada	3,753,545	3,528,228

The accompanying notes form an integral part of these statements.

6.0 Notes to Financial Statements (unaudited) for the year ended March 31, 2017

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 report 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 Armed 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 ensures that Veterans and those who died in service are honoured and the memory of their sacrifices and achievements is preserved. The Health Care program and Re-establishment services provides treatment and other health-related benefits to Veterans and other eligible persons. The Disability and Death Compensation program supports Veterans and other eligible persons whose lives have been permanently affected as a result of service to their country. The Financial Support program provides income support to eligible Veterans, qualified civilians and their survivors to ensure that recipients have income which is adequate to meet their basic needs. 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. 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:

1. 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 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 “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2016-2017 Report on Plans and Priorities. The planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2016-2017 Report on Plans and Priorities.

2. 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.

3. Amounts due from or to 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 Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

4. Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. Revenues that have been received but not yet earned are recorded as deferred revenue on the Statement of Financial Position. This amount represents prepayments to Sainte Anne’s Hospital for in-patient charges.

   Revenues that are non-respendable are not available to discharge the Department’s liabilities. While the Deputy Head is expected to maintain control, he 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.

5. 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.

   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 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.

6. 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 Armed 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 financial statements as Veterans Affairs Canada expenses these benefits as they become due and records 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.

7. Employee future benefits

   (i) Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan, administered by the Government. Veterans Affairs Canada’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the plan. Veterans Affairs Canada’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.

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

9. Contingent liabilities are potential liabilities that 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 recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

10. Environmental liabilities consist of estimated costs related to the remediation of contaminated sites as well as estimated costs related to obligations associated with the retirement of tangible capital assets and other environmental liabilities.

    Contaminated Sites: A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the department is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Department’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the government’s consolidated revenue fund monthly lending rates for periods of one year and over which is based on the Government’s cost of borrowing. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation. For remediation costs with estimated future cash flows spanning more than 25 years, the Government of Canada’s 25 year Consolidated Revenue Fund lending rate is used as the discount rate.

    Asset Retirement Obligations: A liability for an asset retirement obligation is recognized when all of the following criteria are satisfied: there is an agreement, contract, legislation, or a constructive or equitable obligation that obligates the department to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. These costs are normally capitalized and amortized over the asset’s estimated useful life based on the Department’s best estimates of the cost to retire the tangible asset. If the related asset is fully amortized, the asset retirement costs are expensed. The liability reflects the present value of estimated future cash flows required to retire the assets where amounts can be reasonably estimated and is expected to be settled as the related sites, facilities or assets are removed from service.

    The recorded environmental liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

    If the likelihood of the Department’s responsibility is not determinable, a contingent liability is disclosed in the notes to the financial statements. If measurement uncertainty exists, it is also disclosed in the notes to the financial statements.

11. Foreign currency transactions

    Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars using exchange rates in effect on March 31. Gains and losses resulting from foreign currency transactions are reported on the Statement of Operations and Departmental Net Financial Position according to the activities to which they relate.

12. Tangible capital assets

    All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Veterans Affairs Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

    Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

    Amortization of tangible capital assets

    Asset Class	Amortization Period
    Buildings	25 years
    Works and infrastructure	25 years
    Machinery and equipment	5-15 years
    Informatics	2-5 years
    Motor vehicles	5 years
    Leasehold improvements	Lesser of useful life or term of the lease
    Assets under construction	Once in service, in accordance with asset type

13. 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 contingent liabilities, the useful life of tangible capital assets and the liability for employee future benefits. 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

Veterans Affairs Canada 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, Veterans Affairs Canada 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 thousands of dollars)

	2017	2016
Net cost of operations before government funding and transfers	3,717,189	3,622,659
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(915)	(5,775)
Gain on disposal of tangible capital assets	0	0
Services provided without charge by other government departments	(38,373)	(40,553)
Decrease (Increase) in vacation pay and compensatory leave	(230)	1,007
Decrease (increase) in employee future benefits	8,623	(82)
Expense of tangible capital assets adjustment	4,998	2,616
Refund of previous years' expenses	32,032	16,109
Decrease (Increase) Ste. Anne's Hospital transfer liability	45,890	481
Decrease (increase) in contingent liability	1,830	(1,845)
Writedown of capital assets	0	(1)
Other	(481)	46
Subtotal	3,770,563	3,594,662
Adjustment for items not affecting net cost of operations but affecting authorities:
Transition payments for implementing salary payments in arrears	0	54
Acquisition of tangible capital assets	246	317
Proceeds from disposal of tangible capital assets	0	0
Subtotal	246	371
Current year authorities used	3,770,809	3,595,033

 

(b) Authorities provided and used
(in thousand of dollars)

	2017	2016
Vote 1 - Operating expenditures	1,015,906	903,625
Vote 5 - Grants and Contributions	2,861,462	2,736,010
Statutory amounts	37,063	36,328
Subtotal	3,914,431	3,675,963
Less:
Unused Authorities	(143,622)	(80,930)
Subtotal	(143,622)	(80,930)
Current year authorities used	3,770,809	3,595,033

4. Accounts payable and accrued liabilities

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

Details of the Department's accounts payable and accrued liabilities:
(in thousand of dollars)

	2017	2016
Accounts payable to other government departments and agencies	10,662	14,026
Accounts payable to external parties	369	378
Accrued liabilities	101,569	106,178
Total accounts payable and accrued liabilities	112,600	120,582

5. Employee future benefits

1. Pension benefits: Veterans Affairs Canada employees participate in the public service pension plan (the “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/Québec Pension Plans benefits and they are indexed to inflation.

   Both the employees and Veterans Affairs Canada 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 2016-2017 expense amounts to $25,682,744 ($24,910,128 in 2015-2016). For Group 1 members, the expense represents approximately 1.12 times (1.25 times for 2015-2016) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-2016) the employee contributions.

   Veterans Affairs Canada’s responsibility with regards 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.

2. Severance benefits

   Severance benefits provided to the Department’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2017, all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

   The changes in the obligations during the year were as follows:

   Details of the Employee Future Benefits
   (in thousand of dollars)

   	2017	2016
   Accrued benefit obligation -beginning of year	20,292	20,210
   Expenses for the year (Note 6)	(302)	1,803
   Benefits paid during the year	(8,321)	(1,721)
   Accrued benefit obligation - end of year	11,669	20,292

6. Ste. Anne’s Hospital transfer liability

The Government of Canada and the Government of Quebec signed an agreement on April 16, 2015 to transfer Ste. Anne’s Hospital to the Government of Quebec. As per the terms of the agreement Ste. Anne’s Hospital transferred to the Government of Quebec on April 1, 2016.

As part of the transfer, the Department agreed to make future payments estimated at $64.9 million to the Government of Quebec. In 2016-2017, $45.9 million was paid against this liability.

Consistent with the majority of the programs administered by Veterans Affairs Canada estimated payments related to per diems for veterans and Operational Stress Injury clinics have not been included in these financial statements, but are included in the financial statements of the Government of Canada, the ultimate sponsor of the benefits.

7. Other liabilities

Other liabilities represent funds received from parties which are to be disbursed for specified purposes. The following table presents the details of other liabilities:

Details of other liabilities
(in thousand of dollars)

	Balance April 1, 2016	Receipts and other credits	Payments and other charges	Balance March 31, 2017
Administered accounts	179	49	33	195
Estates fund	264	0	249	15
Veterans administration and welfare trust fund	1,067	278	539	806
Returned soldier's insurance fund	6	1	1	6
Veterans insurance fund	1,551	42	295	1,298
Restricted donations memorial fund	1	0	0	1
Restricted donations wounded warrior fund	1	0	0	1
Restricted donations Vimy Education Centre fund	3,000	2,000	0	5,000
Other accounts	1	0	1	0
Total	6,070	2,370	1,118	7,322

1. Administered accounts

   Pursuant to section 41 of the Pension Act, section 15 of the War Veterans Allowance Act, section 55 of the Veterans Treatment Regulations and section 8 of the Guardianship of Veterans Property Regulations, moneys held in these accounts include: (a) pensions, war veterans allowances and treatment allowances placed under the administration of the Department of Veterans Affairs; and, (b) benefits from other sources such as Old Age Security, Guaranteed Income Supplement or Canada Pension Plan, placed under administration with the consent of the individual. These persons have demonstrated their inability to manage their own affairs. Payments are made out of the accounts to provide food, shelter, clothing, comforts and other necessities to the individual.

2. Estates fund

   This account was established to record the proceeds from the estates of those Veterans who died while receiving hospital treatment or institutional care, and for those Veterans whose funds had been administered by the Government, in accordance with sections 5, 6 and 7 of the Veterans’ Estates Regulations. Individual accounts are maintained and payments are made to beneficiaries pursuant to the appropriate legislative authority.

3. Veterans administration and welfare trust fund

   This account was established to record donations, legacies, gifts, bequests, etc., received, to be disbursed for the benefit of Veterans or their dependents under certain conditions, and for the benefit of patients in institutions, in accordance with section 9 of the Guardianship of Veterans’ Property Regulations.

4. Returned soldiers' insurance fund

   This fund was established by the Returned Soldiers’ Insurance Act, to provide life insurance to contributing Veterans of World War I. The account is credited with premiums and is charged with disbursements for death benefits and cash surrender values. The account is actuarially maintained and an actuarial liability adjustment as at March 31, 2016 of $759 was credited to the account during the year and was charged to expenditures. The final date on which application for this insurance could have been received was August 31, 1933.

5. Veterans insurance fund

   This fund was established by the Veterans’ Insurance Act, to provide life insurance to contributing Veterans of World War II. The account is credited with premiums and is charged with disbursements for death benefits and cash surrender values. The account is actuarially maintained and an actuarial liability adjustment as at March 31, 2016 of $42,398 was credited to the account during the year and was charged to expenditures. The final date on which application for this insurance could have been received was October 31, 1968.

6. Restricted donations - Canadian Memorial

   This account was established to record directed donations for the purpose of management and maintenance of the Canadian Memorial in Green Park, London, UK.

7. Restricted donations - Wounded Warrior Fund

   This account was established to record directed donations for the purpose of providing assistance to support the pilot project designed to assist disenfranchised Veterans in crisis.

8. Restricted donations Vimy Education Centre fund

   This account was established to record directed donations for the purpose of providing assistance to the construction of a visitor education centre at the Canadian National Vimy Memorial.

8. Accounts receivable and advances

The following table presents details of accounts receivable and advances:

Accounts receivable and advances
(in thousand of dollars)

	2017	2016
Cash	25	5
Receivables - external parties	26,916	20,038
Receivables - other Government departments and agencies	15,729	14,413
Employee advances	46	34
Sub-total	42,716	34,490
Allowance for doubtful accounts on external receivables	(7,770)	(7,094)
Gross accounts receivable	34,946	27,396
Accounts receivable held on behalf of Government	0	0
Net accounts receivable	34,946	27,396

9. Tangible capital assets

The following tables present details of tangible capital assets: (in thousands of dollars):

Details of tangible capital assets (Cost)
(in thousand of dollars)

Capital Asset Class	Opening balance	Acquisitions	Adjustments	Disposals and Write-Offs	Closing balance
Land	0	0	0	0	0
Buildings	177,874	0	0	171,796	6,078
Works and infrastructure	7,284	0	0	5,161	2,123
Machinery and equipment	5,768	28	0	4,951	845
Informatics	4,299	29	0	1,271	3,057
Motor vehicles	1,123	0	0	537	586
Leasehold improvements	3,825	189	21	0	4,035
Assets under construction	4,236	5,051	0	0	9,287
Total	204,409	5,297	21	183,716	26,011

Details of tangible capital assets (Accumulated Amortization)
(in thousand of dollars)

Capital Asset Class	Opening balance	Amortization	Adjustments	Disposals and Write-Offs	Closing balance
Land	0	0	0	0	0
Buildings	175,243	246	0	171,796	3,693
Works and infrastructure	6,493	80	0	5,161	1,412
Machinery and equipment	5,548	108	0	4,930	726
Informatics	4,115	81	1	1,218	2,979
Motor vehicles	1,085	16	0	538	563
Leasehold improvements	2,700	384	0	0	3,084
Assets under construction	0	0	0	0	0
Total	195,184	915	1	183,643	12,457

 

Net Book Value
(in thousand of dollars)

Capital Asset Class	2017 Net Book Value	2016 Net Book Value
Land	0	0
Buildings	2,385	2,631
Works and infrastructure	711	791
Machinery and equipment	119	220
Informatics	78	184
Motor vehicles	23	38
Leasehold improvements	951	1,125
Assets Under Construction	9,287	4,236
Total	13,554	9,225

10. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:

1. Environmental liabilities

   The government has developed a “Federal Approach to Contaminated Sites”, which incorporates a risk-based approach to the management of contaminated sites. Under this approach the Government has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aides in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.

   Veterans Affairs Canada has identified approximately 2 sites where the Department is obligated, or likely to be obligated, to the remediation of contaminated sites. A liability has not been recorded as Veterans Affairs Canada is unlikely to incur remediation costs.

   Veterans Affairs Canada’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities. Any additional liabilities will be accrued in the year in which they become known and can be reasonably estimated.

2. Claims and litigation

   In the normal course of its operations, the department becomes 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 has been accrued and an expense recorded on the department's financial statements. As at March 31, 2017, the department has a contingent liability of $1.2 million based on the department's legal assessment of potential liability. The existence and amount of liability depend upon the future outcome of these claims, which are not currently determinable.

   Veterans Affairs Canada is named as a defendant in a suit alleging that services, assistance and benefits the Canadian Force Members and former members receive under the Canadian Forces Members and Veterans Re-establishment and compensation Act, S.C. 2011, c12 (New Veterans Charter) are substantially less than that which they would receive under either the Pension Act, through Court proceedings or under the various workers’ compensation programs. The outcome of this claim is not determinable at this time. The potential financial impact of this case cannot be estimated but could be significant. No accrual for this contingency has been made in the financial statements.

11. Related party transactions

Veterans Affairs Canada is related as a result of common ownership to all government 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. During the year, Veterans Affairs Canada received common services which were obtained without charge from other government departments as disclosed below.

1. Common services provided without charge by other Government departments:

   During the year, Veterans Affairs Canada received services without charge from certain common service organizations, related to accommodation, legal services, employer’s contribution to the health and dental insurance plans and workers’ compensation coverage. These services provided without charge have been recorded in the Department’s Statement of Operations and Departmental Net Financial Position as follows:

   A. Statement of Operations and Departmental Net Financial Position
   (in thousands of dollars)

   	2017	2016
   Accommodation	19,374	19,374
   Employer's contribution to the health and dental insurance plans	17,925	19,843
   Legal services	732	959
   Workers' compensation	342	377
   Total	38,373	40,553

   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 and Departmental Net Financial Position.

2. Other transactions with related parties

   (b) Other transactions with related parties
   (in thousands of dollars)

   	2017	2016
   Accounts Receivable - Other government departments and agencies	13,757	12,591
   Accounts Payable - Other government departments and agencies	10,662	14,026
   Expenses - Other government departments and agencies	18,306	19,756
   Revenues - Other government departments and agencies	0	0

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

12. Transfers from/to other government departments

During the fiscal year 2016-2017 there were no transfer from/to other government departments.

13. Segmented information

Presentation by segment is based on the Department’s program activity 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 and revenue generated for the main program activities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

Expenses incurred and revenue generated for the main program activities, by major object of expenses and by major type of revenues.
(in thousands of dollars)

Revenues and Expenses	Disability and Death Compensation	Veterans Health and Re-establisment	Financial Support Program	Canada Remembers
Transfer payments
Individuals	2,029,155	350,499	351,138	0
Non-profit organizations	0	0	0	17,477
Other countries and international organizations	0	0	0	11,114
Other	0	0	43	0
Total transfer payments	2,029,155	350,499	351,181	28,591
Operating
Professional and special services	8,012	410,736	819	8,394
Salaries and employee benefits	64,746	103,422	6,703	8,119
Utilities, materials and supplies	301	212,347	29	563
Transportation and communications	2,827	22,774	277	4,284
Repairs and maintenance	0	7,094	0	5,910
Accommodation	5,969	7,703	470	669
Amortization	218	305	21	312
Expenses incurred on behalf of Government	0	0	0	0
Other	669	(3,692)	68	(716)
Total operating expenses	82,499	760,689	8,387	27,535
Total expenses	2,111,654	1,111,188	359,568	56,126
Revenues
Hospital services	0	28	0	0
Meals	0	0	0	0
Sale of goods and information	2	2	0	0
Other	803	130	10	43
Revenues earned on behalf of Government	(798)	(151)	(10)	(43)
Total revenues	7	9	0	0
Net Cost from continuing Operations	2,111,647	1,111,179	359,568	56,126

Expenses incurred and revenue generated for the main program activities, by major object of expense and by major type of revenue
(in thousands of dollars)

Revenues and Expenses	Veterans Ombudsman	Internal Services	2017 Total	2016 Total
Transfer payments
Individuals	0	0	2,730,792	2,656,437
Non-profit organizations	0	0	17,477	12,067
Other countries and international organizations	0	0	11,114	13,041
Other	0	0	43	48
Total transfer payments	0	0	2,759,426	2,681,593
Operating
Professional and special services	475	13,328	441,764	394,243
Salaries and employee benefits	3,964	59,601	246,555	288,417
Utilities, materials and supplies	28	444	213,712	173,306
Transportation and communications	282	3,666	34,110	30,881
Repairs and maintenance	24	4,028	17,056	23,436
Accommodations	235	4,601	19,374	19,374
Amortization	3	56	915	5,775
Expenses incurred on behalf of Government	0	(2,368)	(2,368)	(3,263)
Other	33	(9,730)	(13,338)	8,920
Total operating expenses	5,044	73,626	957,780	941,089
Total expenses	5,044	73,626	3,717,206	3,622,682
Revenues
Hospital services	0	0	28	14,881
Meals	0	0	0	333
Sale of goods and information	0	1	5	13
Other	1	1	988	1,224
Revenues earned on behalf of Government	(1)	(1)	(1,004)	(16,428)
Total revenues	0	1	17	23
Net Cost from continuing Operations	5,044	73,625	3,717,189	3,622,659