Future-oriented Financial Statements of Royal Canadian Mounted Police

For the year ending
March 31, 2014

Statement of Management Responsibility

Responsibility for the compilation, content, and presentation of the accompanying future-oriented financial information for the year ending March 31, 2014 rests with departmental management. The future-oriented financial information has been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector. The future-oriented financial information is submitted for Part III of Estimates (Report on Plans and Priorities), and will be used in the department's Departmental Performance Report to compare with actual results.

Departmental management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at December 11, 2012 and reflect the plans described in the Report on Plans and Priorities. Much of the future-oriented financial information is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. However, as with all such assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal years covered in the accompanying future-oriented financial information will vary from the information presented and the variations may be material.

Ottawa, Canada
March 18, 2013

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FUTURE-ORIENTED STATEMENT OF FINANCIAL POSITION

As at March 31

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	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Liabilities
Accounts payables and accrued liabilities (Note 6)	$ 476,338	$ 435,020
Vacation pay and compensatory leave	272,570	250,791
RCMP Pension accounts (Note 7)	13,204,679	13,275,622
Deferred revenue (Note 8)	153,244	170,291
Lease obligation for tangible capital assets (Note 9)	14,355	13,995
Employee future benefits (Note 10)	237,953	235,499
Other liabilities (Note 11)	6,798	6,872
Total gross liabilities	14,365,937	14,388,090
Liabilities held on behalf of Government
Deferred revenue (Note 8)	(421)	(468)
Total Liabilities held on behalf of Government	(421)	(468)
Total net liabilities	14,365,516	14,387,622
Assets
Financial assets
Due from Consolidated Revenue Fund	13,376,655	13,448,705
Accounts receivable and advances (Note 12)	677,623	697,925
Total gross financial assets	14,054,278	14,146,630
Financial assets held on behalf of Government
Accounts receivable and advances (Note 12)	(47,890)	(49,393)
Total financial assets held on behalf of Government	(47,890)	(49,393)
Total net financial assets	14,006,388	4,097,237
Departmental net debt	359,128	290,385
Non-financial assets
Inventory (Note 13)	64,709	65,770
Tangible capital assets (Note 14)	1,514,441	1,588,770
Total non-financial assets	1,579,150	1,654,540
Departmental net financial position	$ 1,220,022	$ 1,364,155

Contractual obligations (Note 15)

Contingent liabilities (Note 16)

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

Ottawa, Canada
March 18, 2013

FUTURE-ORIENTED STATEMENT OF OPERATIONS AND DEPARTMENTAL NET FINANCIAL POSITION

For the Year Ending March 31

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Expenses
Police Operations	$ 3,852,594	$ 3,658,231
Internal Services	748,062	779,097
Canadian Law Enforcement Services	288,793	284,256
International Policing Operations	64,978	59,697
Canadian Police Culture and Heritage	12,865	11,368
Statutory Payments	141,167	148,487
Expenses incurred on behalf of Government	140	(121)
Total expenses	5,108,599	4,941,015
Revenues
Policing services	1,806,150	1,889,043
Firearms registration fees	7,800	8,190
Other revenues	64,164	84,778
Revenues earned on behalf of Government	(119,887)	(125,216)
Total revenues	1,758,227	1,856,795
Net cost of operations before government funding and transfers	3,350,372	3,084,220
Government funding and transfers
Net cash provided by Government	3,219,624	2,848,296
Change in due from Consolidated Revenue Fund	124,909	72,050
Services provided without charge by other government departments (Note 17)	322,695	308,007
Net cost of operations after government funding and transfers	(316,856)	(144,133)
Departmental net financial position – Beginning of year	903,166	1,220,022
Departmental net financial position – End of year	$ 1,220,022	$ 1,364,155

Segmented information (Note 18)

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

FUTURE-ORIENTED STATEMENT OF CHANGE IN DEPARTMENTAL NET DEBT

For the Year Ending March 31

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Net cost of operations after government funding and transfers	$ (316,856)	$ (144,133)
Change due to tangible capital assets
Acquisition of tangible capital assets	341,393	267,613
Amortization of tangible capital assets	(185,895)	(193,284)
Total change due to tangible capital assets	155,498	74,329
Change due to inventories	(214)	1,061
Net decrease in departmental net debt	(161,572)	(68,743)
Departmental net debt – Beginning of year	520,700	359,128
Departmental net debt – End of year	$ 359,128	$ 290,385

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

FUTURE-ORIENTED STATEMENT OF CASH FLOWS

For the Year Ending March 31

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Operating Activities
Net cost of operations before government funding and transfers	$ 3,350,372	$ 3,084,220
Non-cash items:
Amortization of tangible capital assets	(185,895)	(193,284)
Services provided without charge by other government departments (Note 17)	(322,695)	(308,007)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances	(25,040)	18,799
Increase (decrease) in inventory	(214)	1,061
Decrease (increase) in accounts payable and accrued liabilities	(55,310)	41,318
Decrease (increase) in vacation pay and compensatory leave	(26,233)	21,779
Increase in RCMP Pension Accounts	(120,660)	(70,943)
Increase in deferred revenue	(15,294)	(17,000)
Decrease in future employee benefits	278,924	2,454
Increase in other liabilities	(65)	(74)
Cash used in operating activities	2,877,890	2,580,323
Capital investing activities
Acquisitions of tangible capital assets	341,393	267,613
Cash used in capital investment activities	341,393	267,613
Financing activities
Lease payments for tangible capital assets	341	360
Cash used in financing activities	341	360
Net cash provided by Government of Canada	$ 3,219,624	$ 2,848,296

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

1. Authority and Objectives

The Royal Canadian Mounted Police (RCMP) is Canada’s national police service and an agency of the Department of Public Safety and Emergency Preparedness.

The RCMP objectives are based on the authority and responsibility assigned under section 18 of the Royal Canadian Mounted Police Act. The objectives of the RCMP are to enforce laws, prevent crime, and maintain peace, order and security. Six Programs highlight our Program Alignment Architecture (PAA). These include:

Police Operations

Under the authority of the RCMP Act, this Program provides Canadians with policing services at the federal, provincial and municipal levels and within Aboriginal communities. As described in the RCMP Act, these services include all duties that are assigned to peace officers in relation to the preservation of the peace, the prevention of crime and of offences against the laws of Canada and the laws in force in any province in which they may be employed, and the apprehension of criminals and offenders and others who may be lawfully taken into custody; the execution of all warrants, and performing all duties and services in relation thereto, that may, under the RCMP Act or the laws of Canada or the laws in force in any province, be lawfully executed and performed by peace officers; performing of all duties that may be lawfully performed by peace officers in relation to the escort and conveyance of convicts and other persons in custody to or from any courts, places of punishment or confinement, asylums or other places; and performing other duties and functions as are prescribed by the Governor in Council or the Commissioner. This Program contributes to a safe and secure Canada by providing general law enforcement activities in addition to education and awareness activities delivered by employees of the RCMP to the public, businesses and other agencies/organizations within Canada. The RCMP’s education and awareness activities, for example information sessions on crime prevention, national security, financial crime, drugs and organized crime, are aimed at reducing victimization of Canadians. Additionally, this Program ensures the protection of designated persons and security at major events which in turn mitigates any potential threats to Canada’s population. The Program also delivers a high level of technical and operational support to ensure that the RCMP reaches its overarching goal of reducing criminal activity which affects Canadians.

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of Programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a Program.

Canadian Law Enforcement Services

This Program provides the Canadian Law Enforcement community with the necessary scientific, technical, investigative and educational support to deliver proactive, intelligence based policing and law enforcement services to their respective communities and partners. Additionally, this Program provides educational opportunities to members of the Canadian Law Enforcement community to enable them to develop their skills thus increasing their effectiveness in contributing to a safer Canada. This Program is necessary to ensure that Canadian law enforcement communities have access to the required tools, systems, technologies (i.e. forensic support and expertise, criminal intelligence, firearms registry and databases, etc) and education which in turn will contribute to the reduction of criminal activity affecting Canadians.

Statutory Payments

This Program ensures that RCMP employees and their families are provided income security in the event of disability or death. This Program is necessary to ensure that an appropriate level of support is afforded to those who are affected by circumstances beyond their control and as a result of their employment with the RCMP. The activities within this Program are regulated by statutory payments, for example, the RCMP Pension Continuation Act payments.

International Policing Operations

This Program furthers Canada’s global peace and security agenda through cooperation and support of the international law-enforcement community, thereby ensuring that both Canadians and the global community are safer. This Program addresses the transnational scope of crime and terrorism by building relationships with international policing partners, participating in the INTERPOL global information sharing network and conducting extra-territorial criminal investigations. Additionally, the RCMP actively participates in multiple missions abroad in a peacekeeping role and by providing support to nations at risk in building their law enforcement capacity. Through this international cooperation and collaboration, this Program contributes directly to a more secure world and Canada.

Canadian Police Culture and Heritage

In order to protect the RCMP’s internationally recognized image, reputation and rich heritage, this Program works to promote the positive image of the RCMP while building relationships with domestic and international law enforcement, government and community partners. The Program provides advice and analysis to internal and external clients, including federal, provincial and municipal partners, academic institutions, Royal Household representatives, and non-government organizations, regarding appropriate ceremonial features of special events and occurrences (e.g., Olympics, expos, summits, police officer funerals). Through the activities of this Program, the RCMP contributes to Canada’s vibrant culture and heritage.

2. Significant Assumptions

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

The information in the estimated results for fiscal year 2012-2013 is based on actual results as at December 10, 2012 and forecasts for the remainder of the fiscal year. Estimated year end information for 2012-13 is used as the opening position for the 2013-2014 planned results, and forecasts have been made for the planned results for the 2013-14 fiscal year.

The main assumptions are:

1. The RCMP’s activities will remain substantially the same as for the previous year.
2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
3. Allowances for uncollectibility are based on historical experience. The general historical pattern is expected to continue.
4. Estimated year end information for 2012-2013 is used as the opening position for the 2013-2014 forecasts.

These assumptions are adopted as at December 11, 2012.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2012-2013 and 2013-2014, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these future-oriented financial statements, the RCMP has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:

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

Once the Report on Plans and Priorities is presented, the RCMP will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented financial statements have been prepared in accordance with the Treasury Board Accounting Standards in effect for the 2012-2013 fiscal year. These accounting policies 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 RCMP is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the RCMP do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. The future-oriented financial statements are based on accrual accounting. Consequently, items presented in the Future-oriented Statement of Operations and Departmental Net Financial Position and in the Future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.

(b) Net cash provided by Government – The RCMP operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the RCMP is deposited to the CRF and all cash disbursements made by the RCMP 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) 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 RCMP is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues:

Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.

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

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

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

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

(e) Expenses – are recorded on the accrual basis:

Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.

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 accommodation, employer contributions to the health and dental insurance plans, legal services and workers’ compensation are recorded as operating expenses at their estimated cost.

(f) Employee future benefits:

Pension benefits for Public Service employees: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The RCMP’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the RCMP to make contributions for any actuarial deficiencies of the Plan. The RCMP’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.

Pension benefits for RCMP members: The Government sponsors a variety of employee future benefits such as pension plans and disability benefits, which cover members of the RCMP. The department administers the pension benefits for members of the RCMP. The actuarial liability and related disclosures for these future benefits are presented in the financial statements of the Government. This differs from the accounting and disclosures of future benefits for RCMP presented in these financial statements whereby pension expense corresponds to the department’s annual contributions toward the cost of current service. In addition to its regular contributions, current legislation also requires the Government to make contributions for actuarial deficiencies in the RCMP Pension Plan. These contributions are expensed in the year they are credited to the Plan. This accounting treatment corresponds to the funding provided to departments through Parliamentary authorities.

Severance benefits: Public Service employees and RCMP members are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees and RCMP members is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

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

(h) Contingent liabilities – Contingent liabilities are potential liabilities which 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 future-oriented financial statements.

(i) Environmental liabilities – Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management’s best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the RCMP becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the RCMP’s obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the future-oriented financial statements.

(j) Inventory – Inventory consists primarily of uniforms, firearms and ammunition and other parts, material and supplies held for future program delivery and not intended for resale. Inventory is valued at cost using the average cost method. If there is no longer any service potential, inventory is valued at the lower of cost net or net realizable value.

(k) 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. The RCMP does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, and assets located on Indian Reserves and museum collections.

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

Asset Class	Amortization Period
Buildings	20 to 30 years
Works and Infrastructure	20 years
Machinery and Equipment	5 to 15 years
Vehicles	3 to 15 years
Computer Hardware	4 to 7 years
Computer Software	3 to 7 years
Leasehold Improvements	Lesser of remaining term of lease or useful life of the improvement
Leased Tangible Capital Assets	Over term of lease/useful life

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

(l) Intellectual property such as licences, patents and copyrights are expensed in the period in which they are incurred.

5. Parliamentary Authorities

The RCMP receives most of its funding through annual parliamentary authorities. Items recognized in the Future-oriented Statement of Operations and Departmental Net Financial Position and the Future-oriented Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the RCMP 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 requested authorities

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Net cost of operations before government funding and transfers	$ 3,350,372	$ 3,084,220
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(185,895)	(193,284)
Services provided without charge by other government departments	(322,695)	(308,007)
Decrease (increase) in vacation pay and compensatory leave	(26,233)	21,779
Decrease in employee future benefits	278,924	2,454
Decrease (increase) in accrued liabilities	(70,604)	24,318
Bad debt expense	114	(99)
Other	96,456	(47,298)
Total items affecting net cost of operations but not affecting authorities	(229,933)	(500,137)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets	341,393	267,613
Decrease in lease obligations for tangible capital assets	341	360
Increase (decrease) in inventory	(214)	1,061
Total items not affecting net cost of operations but affecting authorities	341,520	269,034
Forecast authorities available	$ 3,461,959	$ 2,853,117

(b) Authorities requested

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Authorities requested:
Vote 45 – Operating Vote	$ 2,468,836	$ 1,942,090
Vote 50 – Capital Vote	341,393	267,613
Vote 55 – Grants and Contributions	156,654	163,974
Statutory Vote	495,076	479,440
Forecast authorities available	$ 3,461,959	$ 2,853,117

Forecast authorities requested for the year ending March 31, 2014 are the planned spending amounts presented in the 2013-2014 Report on Plans and Priorities. Estimated authorities requested for the year ending March 31, 2013 include amounts presented in the 2012-2013 Main Estimates and Supplementary Estimates (A) and (B), amounts planned for presentation in Supplementary Estimates (C) and estimates of amounts to be allocated at year-end from Treasury Board central votes.

6. Accounts Payable and Accrued Liabilities

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

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Accounts payable – Other government departments and agencies	$ 45,619	$ 41,662
Accounts payable – External parties	333,985	305,015
Total accounts payable	379,604	346,677
Accrued liabilities	96,734	88,343
Total accounts payable and accrued liabilities	$ 476,338	$ 435,020

7. RCMP Pension Accounts

The department maintains accounts to record the transactions pertaining to the RCMP Pension Plan, which comprises the RCMP Superannuation Account, the RCMP Pension Fund Account, the Retirement Compensation Arrangement Account and the Dependants Pension Fund Account.

The Royal Canadian Mounted Police Pension Plan (the “Plan”), which is governed by the Royal Canadian Mounted Police Superannuation Act (the “RCMPSA” or the “Act”), provides pension benefits to all members of the Royal Canadian Mounted Police (“RCMP”). This Act has been in effect since April 1, 1960. The following description of the plan is a summary only:

The Plan is a contributory defined benefit plan covering all Regular and Civilian members of the RCMP. Membership in the Plan is compulsory for all members of the RCMP regardless of length of service.

The Government of Canada is the sole sponsor of the Plan. The Minister of Public Safety is the Minister responsible for the RCMPSA. The RCMP is responsible for the management of the Plan. Responsibility for the day-to-day administration of the Plan was outsourced to Morneau Shepell. The Office of the Superintendent of Financial Institutions makes periodic actuarial valuations of the Plan.

RCMP Superannuation Account

Until April 1, 2000, separate market-invested funds were not set aside to provide for payment of pension benefits. Instead, transactions relating to the Plan were recorded in a RCMP Superannuation Account created by legislation in the Accounts of the Government of Canada.

The RCMP Superannuation Account is established in the Accounts of Canada pursuant to the RCMPSA. It portrays a notional portfolio of bonds and is not funded by the Government of Canada. The RCMPSA requires that this Account record transactions such as contributions, benefits paid and transfers that pertain to pre-April 1, 2000 service, and that the Account be credited with interest. The Royal Canadian Mounted Police Superannuation Regulations require that the interest be credited quarterly at rates calculated as though the amounts recorded in the Account were invested quarterly in a notional portfolio of Government of Canada 20-year bonds held to maturity.

RCMP Pension Fund Account

Pursuant to the RCMPSA as amended by the Public Sector Pension Investment Board Act, transactions relating to service subsequent to March 31, 2000, are now recorded in the RCMP Pension Fund (the “Pension Fund”), where the excess of contributions over benefits and administration costs is invested in capital markets by the Public Sector Pension Investment Board (“PSP Investments”). PSP Investments is a separate Crown Corporation that commenced operations in April 1, 2000. Its statutory objectives are to manage the funds transferred to it in the best interests of the contributors and beneficiaries and to maximize investment returns without undue risk of loss having regard to the funding requirements of the Plan.

The net amount of contributions less benefits and other payments is regularly transferred to PSP Investments for investment in capital markets. At March 31, the balance in the RCMP Pension Fund Account represents amounts of net contributions in transit awaiting imminent transfer to PSP investments.

Retirement Compensation Arrangement Account

The Retirement Compensation Arrangement (RCA) account records transactions for pension benefits that are provided in excess of those permitted under the Income Tax Act. The RCA is registered with Canada Revenue Agency (CRA) and a transfer is made annually between the RCA Account and CRA to either remit a 50-percent refundable tax in respect of the net contributions and interest credits or to be credited a reimbursement based on the net benefit payments.

Dependants Pension Fund Account

The Royal Canadian Mounted Police (Dependants) Pension Fund was established in 1934 pursuant to the Royal Canadian Mounted Police Act and is currently operated under Part IV of the Royal Canadian Mounted Police Pension Continuation Act (effective 1959) and the related Regulations.

The Act provides for members of the Force, other than commissioned officers appointed before March 1, 1949, to purchase certain survivorship benefits for their dependants by payment of specified contributions.

All monetary transactions of the Fund are made through a specified purpose account in the Consolidated Revenue Fund (CRF).

The following tables provides details of the RCMP Pension Plan Pension Accounts:

RCMP Superannuation Account	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening Balance	$ 13,015,853	$ 13,135,749
Funds received and other credits	726,053	700,280
Payments and other charges	(606,157)	(629,764)
Transfer to the PSPIB	-	-
Closing balance	$ 13,135,749	$ 13,206,265

 

RCMP Pension Fund Account	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening Balance	$ 13,680	$ 15,011
Funds received and other credits	431,649	449,817
Payments and other charges	(93,843)	(106,256)
Transfer to the PSPIB	(336,475)	(342,026)
Closing balance	$ 15,011	$ 16,546

 

Retirement Compensation Arrangement Account	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening Balance	$ 30,546	$ 31,553
Funds received and other credits	2,836	2,288
Payments and other charges	(1,829)	(1,605)
Transfer to the PSPIB	-	-
Closing balance	$ 31,553	$ 32,236

 

Dependants Pension Fund Account	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening Balance	$ 23,940	$ 22,366
Funds received and other credits	1,311	1,153
Payments and other charges	(2,885)	(2,944)
Transfer to the PSPIB	-	-
Closing balance	$ 22,366	$ 20,575

 

Total Pension Accounts	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening Balance	$ 13,084,019	$ 13,204,679
Funds received and other credits	1,161,849	1,153,538
Payments and other charges	(704,714)	(740,569)
Transfer to the PSPIB	(336,475)	(342,026)
Closing balance	$ 13,204,679	$ 13,275,622

8. Deferred Revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties that are restricted in order to fund the expenditures related to specific research projects and stemming from amounts received for fees prior to services being performed. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed.

Deferred revenue – Contract policing arrangements on tangible capital assets

Deferred revenue for contract policing arrangements on tangible capital assets represents the balance of revenue received at the time of acquisition of tangible capital assets owned by RCMP and dedicated for usage to meet contractual obligations over the life of the asset. The deferred revenue is earned on the same basis as the amortization of the corresponding capital asset.

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Opening balance	$ 137,009	$ 153,244
Increase in net book value of contract policing capital assets	45,642	47,925
Revenue recognized	(29,407)	(30,878)
Gross closing balance	153,244	170,291
Deferred revenues held on behalf of Government	(421)	(468)
Net closing balance	$ 152,823	$ 169,823

9. Lease Obligation for Tangible Capital Assets

The RCMP has entered into an agreement to lease a building under a capital lease arrangement with a cost of $15,493,459 and accumulated amortization of $1,549,346 as at March 31, 2012 ($929,608 at March 31, 2011). The obligation related to the upcoming years include the following:

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
2013	$ 1,146	$ -
2014	1,146	1,146
2015	1,146	1,146
2016	1,146	1,146
2017 and thereafter	19,960	19,960
Total future minimum lease payments	24,544	23,398
Less: imputed interest (5.54%)	10,189	9,403
Balance of obligation under leased tangible capital assets	$ 14,355	$ 13,995

10. Employee Future Benefits

(a) Pension benefits (Public Service employees): The RCMP’s public service employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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 RCMP contribute to the cost of the Plan. The 2013-14 forecast expense amounts to $59 million ($59 million in 2012-13), which represents approximately 1.8 times the contributions by employees. The RCMP’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) Pension benefits (RCMP members): The Government of Canada sponsors a variety of employee future benefits such as pension plans and disability benefits, which cover members of the RCMP. The department administers the pension benefits for members of the RCMP. The actuarial liability and related disclosures for these future benefits are presented in the financial statements of the Government of Canada. This differs from the accounting and disclosures of future benefits for RCMP presented in these financial statements whereby pension expense corresponds to the department’s annual contributions toward the cost of current service.

Both the members and the RCMP contribute to the cost of the Plan. The 2013-14 expense amounts to $275 million ($275 million in 2012-13), which represents approximately 2.0 times the contributions by members. The RCMP is responsible for the administration of the Plan including determining eligibility for benefits, calculating and paying benefits, developing legislation and related policies, and providing information to Plan members. The actuarial liability and actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.

(c) Severance benefits: The RCMP provides severance benefits to its employees and RCMP members 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. Information about the severance benefits, estimated as at the date of these statements, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives, certain non-represented employees, and members, 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 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.

Severance Benefits

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Public Service Employees
Accrued benefit obligation – Beginning of year	$ 28,620	$ 30,710
Expense for the year	5,890	1,346
Benefits paid during the year	(3,800)	(3,800)
Accrued benefit obligation – End of year	$ 30,710	$ 28,256
RCMP members
Accrued benefit obligation – Beginning of year	$ 488,257	$ 207,243
Expense for the year	38,566	30,000
Benefits paid during the year	(319,580)	(30,000)
Accrued benefit obligation – End of year	$ 207,243	$ 207,243
Total
Accrued benefit obligation – Beginning of year	$ 516,877	$ 237,953
Expense for the year	44,456	31,346
Benefits paid during the year	(323,380)	(33,800)
Accrued benefit obligation – End of year	$ 237,953	$ 235,499

11. Other Liabilities

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Benefit Trust Fund	$ 2,101	$ 2,043
Environmental Liabilities	2,168	2,168
Other	2,529	2,661
Other liabilities	$ 6,798	$ 6,872

Benefit Trust Fund: This account was established by section 23 of the Royal Canadian Mounted Police Act, to record moneys received by personnel of the Royal Canadian Mounted Police, in connection with the performance of duties, over and above their pay and allowances. The fund is used for (i) the benefit of members, former members and their dependants; (ii) as a reward, grant or compensation to any person who assists the RCMP in the performance of its duties in any case where the Minister is of the opinion that such person is deserving of recognition for the services rendered; (iii) as a reward to any person appointed or employed under the authority of the RCMP Act for good conduct or meritorious service, and (iv) for such other purposes that would benefit the RCMP as the Minister may direct.

12. Accounts Receivable and Advances

The following table presents details of the RCMP’s accounts receivable and advances balances:

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Receivables – Other government departments and agencies	$ 220,000	$ 220,000
Receivables – External parties	451,538	472,261
Temporary advances	7,855	7,512
Standing advances	3,022	3,164
Subtotal	682,415	702,937
Less: Allowance for doubtful accounts on receivables from external parties	(4,792)	(5,012)
Gross accounts receivables	677,623	697,925
Accounts receivable held on behalf of Government	(47,890)	(49,393)
Net accounts receivable	$ 629,733	$ 648,532

13. Inventory

The following table presents details of the inventory, measured at cost using the average cost method:

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Uniforms and equipment	$ 36,884	$ 37,489
Firearms, ammunition and parts	10,354	10,523
Other	17,471	17,758
Total inventory	$ 64,709	$ 65,770

The cost of consumed inventory recognized as an expense in the Future-oriented Statement of Operations and Departmental Net Financial Position is $16,704,000 in 2013-14 ($16,785,000 in 2012-13).

14. Tangible Capital Assets

Cost

Capital Asset Class	2014 Opening Balance ($ thousands)	Acquisitions ($ thousands)	2014 Closing Balance ($ thousands)
Land	$ 60,857	$ 5,159	$ 66,016
Buildings	1,111,764	94,247	1,206,011
Works and Infrastructure	79,943	6,777	86,720
Machinery and Equipment	224,315	19,015	243,330
Computer Hardware	367,195	31,128	398,323
Computer Software	258,001	21,872	279,873
Vehicles	686,556	58,201	744,757
Leasehold Improvements	36,740	3,115	39,855
Capital Leases	18,739	1,590	20,329
Assets under Construction	312,705	26,509	339,214
Total	$ 3,156,815	$ 267,613	$ 3,424,428

Accumulated Amortization

Capital Asset Class	2014 Opening Balance ($ thousands)	Amortization ($ thousands)	2014 Closing Balance ($ thousands)
Land	$ -	$ -	$ -
Buildings	547,586	44,059	591,645
Works and Infrastructure	22,149	4,279	26,428
Machinery and Equipment	151,932	16,987	168,919
Computer Hardware	312,163	32,435	344,598
Computer Software	229,808	41,593	271,401
Vehicles	350,986	48,657	399,643
Leasehold Improvements	25,515	4,561	30,076
Capital Leases	2,235	713	2,948
Assets under Construction	-	-	-
Total	$ 1,642,374	$ 193,284	$ 1,835,658

Net Book Value

Capital Asset Class	2013 ($ thousands)	2014 ($ thousands)
Land	$ 60,857	$ 66,016
Buildings	564,178	614,366
Works and Infrastructure	57,794	60,292
Machinery and Equipment	72,383	74,411
Computer Hardware	55,032	53,725
Computer Software	28,193	8,472
Vehicles	335,570	345,114
Leasehold Improvements	11,225	9,779
Capital Leases	16,504	17,381
Assets under Construction	312,705	339,214
Total	$ 1,514,441	$ 1,588,770

15. Contractual Obligations

The nature of the RCMP’s activities can result in some large multi-year contracts and obligations whereby the RCMP will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

	2013	2014	2015	2016	2017 & thereafter	Total
	($ thousands)
Capital assets	$ 31,169	$ -	$ -	$ -	$ -	$ 31,169
Services	6,732	5,925	6,016	6,108	1,787	26,568
Other	14,230	-	-	-	-	14,230
Total	$ 52,131	$ 5,925	$ 6,016	$ 6,108	$ 1,787	$ 71,967

16. Contingent Liabilities

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

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the RCMP is obligated or likely to be obligated to incur such costs. As at the date of the preparation of these future-oriented financial statements, the RCMP has identified approximately 23 sites where such action is possible and for which a liability of $2.2 million has been recorded in accrued liabilities. Additional new sites, changes in the remediation approach or material changes in amounts accrued or not accrued are not forecasted for the future years presented in these statements. However, the RCMP’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by the RCMP in the year in which they become likely and can be reasonably estimated.

(b) Claims and litigation

Claims have been made against the RCMP in the normal course of operations. As at the date of the preparation of these future-oriented financial statements, legal proceedings for claims totaling approximately $33 million are currently pending.

(c) Pension litigation

The Public Sector Pension Investment Board Act amended the RCMPSA to enable the Federal Government to deal with excess amounts in the RCMP Superannuation Account and the RCMP Pension Fund. The legal validity of these provisions was challenged in the Ontario Superior Court of Justice. On November 20, 2007, the Court rendered its decision and dismissed all of the plaintiffs’ claims. The decision was appealed to the Ontario Court of Appeal and the hearing took place in April, 2010. The Ontario Court of Appeal dismissed the appeals on October 8, 2010. The plaintiffs applied for leave to appeal to the Supreme Court of Canada in December, 2010. On May 5, 2011, the Supreme Court of Canada granted the application for leave to appeal. The appeal was heard on February 9, 2012. On December 19, 2012, the Supreme Court of Canada dismissed the plaintiffs’ appeal.

17. Related Party Transactions

The RCMP is related as a result of common ownership to all Government departments, agencies, and Crown corporations. The RCMP enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year the RCMP will receive services without charge from other government departments as presented below.

(a) Common services provided without charge by other government departments

During the year the RCMP is forecasted to receive without charge from other departments, accommodation, employer’s contribution to the health and dental insurance plans, workers’ compensation and legal services. These services provided without charge have been recorded in the RCMP’s Future-oriented Statement of Operations and Departmental Net Financial Position as follows:

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Employer’s contributions to the health and dental plans paid by Treasury Board Secretariat	$ 248,467	$ 226,766
Accommodation provided by Public Works and Government Services	72,398	79,375
Legal services provided by Department of Justice	1,456	1,511
Workers’ compensation cost provided by Human Resources and Skills Development Canada	374	355
Total	$ 322,695	$ 308,007

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 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 RCMP’s Future-oriented Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

	Estimated Results 2013 ($ thousands)	Planned Results 2014 ($ thousands)
Accounts receivable – Other government departments and agencies	$ 220,000	$ 220,000
Accounts payable – Other government departments and agencies	45,619	41,662
Expenses – Other government departments and agencies	523,753	476,894
Revenues – Other government departments and agencies	15,572	16,433

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

18. Segmented Information

Presentation by segment is based on the RCMP’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 4. The following table presents the forecasted expenses incurred and forecasted revenues generated for the main Programs, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

	Policing Operations	Internal Services	Canadian Law Enforcement Services	International Policing Operations	Canadian Police Culture and Heritage
Transfer payments ($ thousands)
Compensatory grants to individuals	$ -	$ -	$ -	$ -	$ -
Transfers to other levels of governments	-	-	14,487	-	-
Other	323	-	650	27	-
Total transfer payments	323	-	15,137	27	-
Operating Expenses ($ thousands)
Salaries and employee benefits	2,730,493	478,186	187,955	34,985	8,579
Professional and special services	272,389	76,694	21,592	8,524	994
Travel and relocation	116,117	32,694	9,205	3,634	424
Amortization of tangible capital assets	103,906	73,413	15,965	-	-
Utilities, material and supplies	69,930	19,691	5,543	2,188	255
Accommodation	117,743	28,643	9,250	2,566	207
Repair and maintenance	58,479	16,465	4,636	1,830	213
Telecommunication	33,881	9,540	2,686	1,060	124
Rentals	16,790	4,727	1,331	525	61
Provision for severance benefits	(1,889)	(393)	(147)	(25)	-
Information	3,258	917	258	102	12
Other operating expenses	136,811	38,520	10,845	4,281	499
Expenses incurred on behalf of Government	(77)	(36)	(8)	-	-
Total operating expenses	3,657,831	779,061	269,111	59,670	11,368
Total expenses	$ 3,658,154	$ 779,061	$ 284,248	$ 59,697	$ 11,368
Revenues ($ thousands)
Policing Services	$ 1,889,043	$ -	$ -	$ -	$ -
Firearms registration fees	-	-	8,190	-	-
Other revenues	-	69,788	14,990	-	-
Revenues earned on behalf of Government	(94,450)	(13,086)	(17,680)	-	-
Total revenues	$ 1,794,593	$ 56,702	$ 5,500	$ -	$ -
Net cost of operations before government funding and transfers	$ 1,863,562	$ 722,359	$ 278,747	$ 59,697	$ 11,368

	Statutory Payments	2014 Total	2013 Total
Transfer payments ($ thousands)
Compensatory grants to individuals	$ 148,487	$ 148,487	$ 141,167
Transfers to other levels of governments	-	14,487	14,487
Other	-	1,000	1,000
Total transfer payments	148,487	163,974	156,654
Operating Expenses ($ thousands)
Salaries and employee benefits	-	3,440,198	3,738,954
Professional and special services	-	380,193	439,614
Travel and relocation	-	162,074	187,405
Amortization of tangible capital assets	-	193,284	185,895
Utilities, material & supplies	-	97,607	112,862
Accommodation	-	158,409	163,784
Repair and maintenance	-	81,623	94,379
Telecommunicaton	-	47,291	54,682
Rentals	-	23,434	27,096
Provision for severance benefits	-	(2,454)	(278,924)
Information	-	4,547	5,258
Other operating expenses	-	190,956	220,800
Expenses incurred on behalf of Government	-	(121)	140
Total operating expenses	-	4,777,041	4,951,945
Total expenses	$ 148,487	$ 4,941,015	$ 5,108,599
Revenues ($ thousands)
Policing services	$ -	$ 1,889,043	$ 1,806,150
Firearms registration fees	-	8,190	7,800
Other revenues	-	84,778	64,164
Revenues earned on behalf of Government	-	(125,216)	(119,887)
Total revenues	$ -	$ 1,856,795	$ 1,758,227
Net cost of operations before government funding and transfers	$ 148,487	$ 3,084,220	$ 3,350,372

19. Adoption of new accounting policies

During the year, the RCMP adopted the revised Treasury Board accounting policy Treasury Board Accounting Standard 1.2 – Departmental and Agency Financial Statements. Net debt (calculated as liabilities less financial assets) is now presented in the Future-oriented Statement of Financial Position. Accompanying this change, the RCMP now presents a Future-oriented Statement of Change in Net Debt and no longer presents a Future-oriented Statement of Equity.

Revenue and related accounts receivable are now presented net of non-respendable amounts in the Future-oriented Statement of Operations and Departmental Net Financial Position and Future-oriented Statement of Financial Position.

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Future-oriented Statement of Operations and Departmental Net Financial Position below “Net cost of operations before government funding and transfers.” In previous years, the RCMP recognized these transactions directly in the Future-oriented Statement of Equity of Canada.