Financial Statements 2015-2016

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Security Intelligence Review Committee (SIRC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of SIRC's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in SIRC's Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout SIRC and through conducting an annual riskbased 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.

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

A Core Control Audit was performed in 20152016 by the Office of the Comptroller General of Canada. The Audit Report and related Management Action Plan are posted on SIRC web site at http://www.sirc.gc.ca/prddpr/audit/cccbeng.html.

Ottawa, Canada
September 2, 2016

Statement of Financial Position (Unaudited)

Contractual obligations (note 8)

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

Ottawa, Canada
September 2, 2016

Statement of Operations and Departmental Net Financial Position (Unaudited)

Segmented information (note 11) The accompanying notes form an integral part of these financial statements.

Statement of Change in Departmental Net Debt (Unaudited)

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

Statement of Cash Flow (Unaudited)

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

Notes to the Financial Statements (Unaudited)

1. Authority and objectives

SIRC was created to provide external review of the Canadian Security Intelligence Service (CSIS) performance of its duties and functions; and to examine complaints by individuals or reports by Minister related to security of Canada.

SIRC derives its powers from CSIS Act promulgated on July 16, 1984. The first Chair and Members were appointed by His Excellency the Governor General on November 30, 1984. SIRC is empowered to set its own Rules of Procedures, and to employ an executive director and adequate staff to support its activities. The Act requires SIRC, not later than September 30 in each fiscal year, to report to the Minister of Public Safety and Emergency Preparedness who must, in turn, table the report in each House of Parliament on any of the first fifteen days on which that House is sitting after the day the Minister receives it. Bill C-38, the Jobs, Growth and Long-term Prosperity Act, expanded SIRC's responsibilities. Pursuant to section 6(4) of the CSIS Act, the report provided by the Director of CSIS to the Minister of Public Safety will now be reviewed by SIRC who will provide the Minister of Public Safety with a certificate stating the extent to which it is satisfied with the content of the report.

To achieve its strategic outcome and to deliver results for Canadians, SIRC articulates its plans and priorities based on the core programs included below.

1.1 Reviews

SIRC conducts reviews of CSIS activities to evaluate their effectiveness, appropriateness and compliance. The Committee develops an annual research plan identifying reviews to be conducted each year, examines CSIS operations, provides a retrospective examination and assessment of specific CSIS investigations and functions, examines information concerning CSIS's activities, assesses CSIS compliance, and issues findings and recommendations.

The objective is to provide Parliament, the Minister of Public Safety and Canadians with a comprehensive picture of CSIS's operational activities, and assurance that CSIS is acting in accordance with the rule of law.

1.2 Investigations

The Committee conducts investigations into complaints made against CSIS, denials of security clearances, Minister's reports in regards to the Citizenship Act and matters referred pursuant to the Canadian Human Rights Act.If jurisdiction is established, investigations include a quasi-judicial hearing presided over by one or more Committee members. The time required to complete an investigation will vary in length depending on the complexity of the file, the quantity of documents to be examined, the number of hearing days required, the availability of the participants and the various procedural matters raised by the parties. On completion of an investigation, SIRC issues a final report containing its findings and recommendations , if applicable.

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. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program. 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 and Acquisition Services.

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

Significant accounting policies are as follows:

(a) Parliamentary authorities 

SIRC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to SIRC 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'' section of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-Oriented Statement of Operations included in 2015─2016 Report on Plans and Priorities. 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 2015─2016 Report on Plans and Priorities.

(b) Net Cash Provided by Government

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

(c) Due from or to the CRF

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 SIRC is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Expenses

Expenses are recorded on the accrual basis:

• Vacation pay is accrued as the benefits are earned by employees under their respective terms of employment.
• Services provided without charge by other government departments for accommodation and employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(e) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government. SIRC's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. SIRC'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.
• 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 future benefits for the Government as a whole.

(f) Accounts receivable

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.

(g) Tangible capital assets

Tangible capital assets having an initial cost of $3,000 or more are recorded at their acquisition cost. SIRC does not capitalize intangibles assets, 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:

(h) Measurement uncertainty

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

3. Parliamentary authorities

SIRC 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, SIRC 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:

4. Accounts payable

The following table presents details of SIRC's accounts payable:

5. Employee future benefits

(a) Pension benefits

SIRC's 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 Plan benefits and they are indexed to inflation.

Both the employees and SIRC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to 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 2015-2016 expense amounts to $248,159 ($247,852 in 2014-2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014─2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014─2015) the employee contributions.

SIRC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Financial Statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

SIRC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination form the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

6. Accounts receivable and advances

The following table presents details of the Security Intelligence Review Committee accounts receivable:

7. Tangible capital assets

8. Contractual obligations

The nature of SIRC's activities can result in some large multi-year contracts and obligations whereby SIRC will be obligated to make future payments when the goods or services are received. These obligations include:

9. Related party transactions

SIRC is related as a result of common ownership to all government departments, agencies, and Crown Corporations. SIRC enters into transactions with these entities in the normal course of business and on normal trade terms.

In addition, SIRC has an agreement with Privy Council Office related to the provision of finance and administration services which is included in section b). During the year, SIRC received common services which were obtained without charge from other government departments as disclosed below.

a) Common services provided without charge by other government departments 

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

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 Services and Procurement Canada are not included in SIRC's Statement of Operations and Departmental Net Financial Position. The costs of information technology infrastructure services provided by Shared Services Canada, following the transfer of responsibilities in November 2011 are also not included in SIRC's Statement of Operations and Departmental Net Financial Position.

b) Other transactions with related parties

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

10. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014─2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of SIRC. However, it did result in the use of additional spending authorities by SIRC. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

11. Segmented information

Presentation by segment is based on SIRC's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred for the main program alignments by major object of expense. The segment results for the period are as follows: