Future Oriented Statement of Operations 2015-2016

For the years ending March 31, 2015 and March 31, 2016

Statement of Management Responsibility

Departmental management is responsible for the future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and assumptions adopted as at September 30, 2014 and reflects the plans described in the Report on Plans and Priorities.

The Honourable Deborah Grey, P.C., O.C.
Interim Chair

Michael E. Doucet
Executive Director
Chief Financial Officer

Ottawa, Canada
January 21, 2015

Future-Oriented Statement of Operations (Unaudited)

Information for the year ended March 31, 2015 includes actual amounts from April 1, 2014 to September 30, 2014. The information for the remainder of fiscal year 2014-15 and for fiscal year 2015-16 is based on forecasts.

The accompanying notes form an integral part of this future-oriented statement of operations.

Notes to the Future-Oriented Statement of Operations
(Unaudited)

1. Authority and Objectives

The Security Intelligence Review Committee (SIRC) is an independent, external review body which reports to Parliament on the operations of the Canadian Security Intelligence Service (CSIS).

SIRC derives its powers from the Canadian Security Intelligence Service Act promulgated on July 16, 1984. The first Chair and Members were appointed by His Excellency the Governor General of Canada 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.

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

The Purpose of the Review Program is to conduct reviews of CSIS activities to evaluate their effectiveness, appropriateness and compliance. Develop an annual research plan identifying reviews to be conducted each year, examine CSIS operations, provide a retrospective examination and assessment of specific CSIS investigations and functions, examine information concerning CSIS's activities, assess CSIS compliance, and issue findings and recommendations.

The objective of this program 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 purpose of the Investigations Program is to conduct 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 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. 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; Material 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.

2. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and the plans of SIRC as described in the Report on Plans and Priorities.

The information in the estimated results for fiscal year 2014-15 is based on actual results as at September 30, 2014 and on forecasts for the remainder of the fiscal year. Forecasts have been used for the preparation of the planned results for the 2015-16 fiscal year.

The main assumptions underlying the forecasts are as follows:

1. SIRC's activities will remain substantially the same as for the previous year.
2. Expenses, including the determination of amounts internal and external to the government, are based on forecasted or historical information.

These assumptions are adopted as at September 30, 2014.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2014-15 and for 2015-16, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations, SIRC 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 statement of operations and the historical statement of operations include the following:

1. The timing and amounts of asset acquisitions may affect amortization expense.
2. 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, SIRC will not be updating the forecasts for any changes in financial resources made in subsequent Supplementary Estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented statement of operations has been prepared using Government's accounting policies that came into effect for the 2011-12 fiscal year which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Expenses

Expenses are recorded on an accrual basis. Expenses for SIRC's operations are recorded when goods are received or services are rendered, including services provided without charges for accommodation and employee contributions to health and dental insurance plans, which are recorded as expenses at their estimated cost. Vacation pay as well as severance benefits are accrued and expenses are recorded as the benefits are earned by employees under their respective terms of employment.

Expenses also include amortization of tangible capital assets which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset.

(b) 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 severance benefits for the Government as a whole.

(c) 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, 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:

(d) Measurement uncertainty

The preparation of this future-oriented statement of operations requires management to make estimates and assumptions that affect the reported amounts of expenses reported in the future-oriented statement of operations. At the time of the preparation of this statement, 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 future-oriented statement of operations in the year they become known.

5. 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 because authorities are primarily based on cash flow requirements. Items recognized in the future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, SIRC has different net cost 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

b) Authorities requested

6. Forecasted Expenses

The following table presents the forecasted expenses incurred by major object. The results for the period are as follows:

7. 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 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 2014-15 forecasted expense amounts to $261,228 ($290,809 in 2015-16). For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2015-16) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2015-16) the employee contributions.

SIRC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the future-oriented statement of operations 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.

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 from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, estimated as at the date of this statement, is as follows:

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 services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

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 the Privy Council Office related to the provision of finance and administration services which is included in the expenses of the section b) of this note. 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 receives 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 Future-Oriented Statement of Operations 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 Works and Government Services Canada are not included in SIRC's Future-Oriented Statement of Operations.

(b) Other transactions with related parties:

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