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Section III – Supplementary information

Organizational Information

Veterans Affairs Canada Organization

Text Version

The Minister of Veterans Affairs is directly supported by the Deputy Minister of Veterans Affairs Canada. The Chair of the Veterans Review and Appeal Board reports to Parliament through the Minister of Veterans Affairs. The Deputy Minister of Veterans Affairs Canada is directly supported by the Associate Deputy Minister of Veterans Affairs Canada.

The following personnel report directly to the Deputy Minister: Assistant Deputy Minister, Veterans Services Branch*; Assistant Deputy Minister, Corporate Services Branch; Assistant Deputy Minister, Public Programs and Communications Branch; Director General, Policy Planning and Liaison; Director General, Co-ordination Secretariat; General Counsel, Justice Canada**.

The following personnel report directly to the Associate Deputy Minister: Director General, Audit and Evaluation Division; Director, Office of Early Conflict Resolution; Executive Director, Federal Healthcare Partnership; Chief Pensions Advocate, Bureau of Pensions Advocates.

* Includes Regional Offices and Ste. Anne's Hospital
** General Counsel is functionally responsible to the Deputy Minister for legal services.

Chart Version

Veterans Review and Appeal Board Organization

Text Version

The following personnel report directly to the Chair of the Veterans Review and Appeal Board : Deputy Chair, Members, Director General.

Chart Version

Table 1: Comparison of Planned to Actual Spending (including FTEs)

($ millions)	2004-05 Actual	2005-06 Actual	Main 1 Esti- mates	Planned Spending	Total 2 Auth- orities	Total Actuals
Pensions, Awards, Allowances for Disability and Death; and Financial Support			2,064.8	2,065.4	2,136.7	1,932.8
Health Care and Re-establishment Benefits and Services			1,062.8	1,062.5	1,077.9	1,021.5
Remembrance Programming			61.5	62.5	69.7	59.6
Veterans Review and Appeal Board redress process for disability pensions and awards			13.7	13.7	14.4	14.1
Budgetary Main Estimates (gross)			3,202.8	3,204.1	3,298.7	3,028.0
Total	2,695.4	2,881.4	3,202.8	3,204.1	3,298.7	3,028.0
Less: Non-respendable revenue 3	39.2	32.6	30.0	30.0	30.0	29.8
Plus: Cost of services received without charge 4	31.6	32.1	32.5	32.5	32.5	32.5
Total Departmental Spending	2,687.8	2,880.9	3,205.3	3,206.6	3,301.2	3,030.7
Full-Time Equivalents	3,463.0	3,676.0	3,758.0	3,758.0	3,798.0	3,695.0

Table 2: Resources by Program Activity

2006-2007
($ millions)	Budgetary							Plus: Non-Budgetary
Program Activity	Operating	Capital	Grants	Contributions and Other Transfer Payments	Total: Gross Budgetary Expenditures	Less: Respendable Revenue	Total: Net Budgetary Expenditures	Loans, Investments and Advances	Total
Pensions, Awards, Allowances for Disability and Death; and Financial Support
Main Estimates	107.9		1,956.9		2,064.8		2,064.8		2,064.8
Planned Spending	108.5		1,956.9		2,065.4		2,065.4		2,065.4
Total Authorities 1	115.9		2,020.8		2,136.7		2,136.7		2,136.7
Actual Spending	116.2		1,816.6		1,932.8		1,932.8		1,932.8
Health Care and Re-establishment Benefits and Services
Main Estimates	759.8	23.0		280.0	1,062.8		1,062.8		1,062.8
Planned Spending	759.5	23.0		280.0	1,062.5		1,062.5		1,062.5
Total Authorities 1	769.8	13.1		295.0	1,077.9		1,077.9		1,077.9
Actual Spending	723.3	11.5		286.7	1,021.5		1,021.5		1,021.5
Remembrance Programming
Main Estimates	24.8	9.0	25.0	2.7	61.5		61.5		61.5
Planned Spending	24.8	10.0	25.0	2.7	62.5		62.5		62.5
Total Authorities 1	31.8	10.0	25.4	2.5	69.7		69.7		69.7
Actual Spending	28.8	8.8	19.8	2.2	59.6		59.6		59.6
Veterans Review and Appeal Board redress process for disability pensions and awards
Main Estimates	13.7				13.7		13.7		13.7
Planned Spending	13.7				13.7		13.7		13.7
Total Authorities 1	14.4				14.4		14.4		14.4
Actual Spending	14.1				14.1		14.1		14.1

Table 3: Voted and Statutory Items

($ millions)	2006-2007
Vote or Statutory Item	Truncated Vote or Statutory Wording	Main Estimates	Planned Spending	Total 1 Authorities	Total Actuals
1	Veterans Affairs Canada – Operating expenditures	856.8	857.1	882.3	833.3
5	Veterans Affairs Canada – Capital expenditures	32.0	33.0	23.1	20.3
10	Veterans Affairs Canada – Grants and contributions	2,264.4	2,264.4	2,343.7	2,125.3
15	Veterans Affairs – Veterans Review and Appeal Board – Operating expenditures	9.4	9.4	10.0	9.5
(S)	Veterans Insurance Actuarial Liability Adjustment	0.2	0.2
(S)	Spending of proceeds from the disposal of surplus Crown Assets			0.1	0.1
(S)	Refund of amounts credited to revenues in previous years			0.3	0.3
(S)	Minister of Veterans Affairs – Salary and motor car allowance	0.1	0.1	0.1	0.1
(S)	Contributions to employee benefit plans	39.9	39.9	39.1	39.1
	Total Portfolio	3,202.8	3,204.1	3,298.7	3,028.0

Table 4: Services Received Without Charge

($ millions)	2006-2007
Accommodation provided by Public Works and Government Services Canada	14.3
Contributions covering employers' share of employees' Insurance premiums and expenditures paid by Treasury Board Secretariat (excluding revolving funds). Employer's contribution to employees' insured benefits plans and associated expenditures paid by TBS	16.6
Workers' Compensation coverage provided by Human Resources and Skills Development Canada	0.5
Salary and associated expenditures of legal services provided by Justice Canada	1.1
Total 2006-2007 Services received without charge	32.5

Table 5: Sources of Non-Respendable Revenue

($ millions)	Actual 2004-2005	Actual 2005-2006	2006-2007
			Main Estimates	Planned Revenue	Total Authorities	Actual
Veterans Affairs Program
Health Care Benefits
Ste. Anne's Hospital: In-patient Charges to the Quebec Provincial Plan (Other Goods and Services)	15.7	15.0	14.0	14.0	14.0	14.2
Ste. Anne's Hospital: Dietary Meals (Other Goods and Services)	0.3	0.4	0.4	0.4	0.4	0.4
Ste. Anne's Hospital: Domiciliary Care (Regulatory Care)	4.2	3.9	4.0	4.0	4.0	3.6
Pensions and Allowances for Disability and Death, and Economic Support
Recovery of Pensions from foreign governments	4.0	3.2	2.7	2.7	2.7	2.7
Refund of previous years' expenditures	14.8	9.5	7.7	7.7	7.7	7.7
Other	0.2	0.6	1.2	1.2	1.2	1.2
Total Non-Respendable Revenue	39.2	32.6	30.0	30.0	30.0	29.8

Table 6: Resource Requirements by Branch or Sector

($ millions)	2006-2007
Organization	Pensions Awards, Allowances for Disability and Death; and Financial Support	Health Care and Re-establishment Benefits and Services	Remembrance Programming	Veterans Review and Appeal Board redress process for disability pensions and awards	Total Port- folio
Veterans Services Branch
Planned Spending	2,014.3	1,030.4			3,044.7
Actual Spending	1,880.7	987.5			2,868.2
Public Programs & Communications Branch
Planned Spending	2.6	2.0	56.9	0.4	61.9
Actual Spending	2.8	2.1	54.3	0.5	59.7
Corporate Services Branch
Planned Spending	31.1	24.1	4.6	1.8	61.6
Actual Spending	33.4	26.7	4.5	2.3	66.9
Executive Branch 1
Planned Spending	17.4	6.0	1.0	0.5	24.9
Actual Spending	15.9	5.2	0.8	0.5	22.4
Veterans Review and Appeal Board
Planned Spending				11.0	11.0
Actual Spending				10.8	10.8
Total Portfolio
Planned Spending	2,065.4	1,062.5	62.5	13.7	3,204.1
Actual Spending	1,932.8	1,021.5	59.6	14.1	3,028.0

Table 7: Major Regulatory Initiatives

On April 1, 2006, Veterans Affairs Canada (VAC) began the process of implementing the Canadian Forces Members and Veterans Re-establishment and Compensation Act (commonly referred to as the New Veterans Charter) and associated Regulations. The Act introduced a comprehensive suite of new benefits and services designed to support Canadian Forces (CF) Veterans and their families in the transition from military to civilian life. The overarching goal of this new suite of programs is to assist CF Veterans and their families achieve and maintain a good quality of life, with a focus on health and independence.

Regulations	Expected Results	Performance Measurement Criteria	Results Achived
Canadian Forces Members and Veterans Re-establishment and Compensation Regulations	Overall Program: Assist CF Veterans and their families to re-establish successfully into civilian society and to achieve and maintain optimum level of health, independence and quality of life within their own community. Job Placement: Enhance the employability of persons for re-entry into the labour market and helping promote work opportunities. Rehabilitation services and vocational assistance: Will enable CF Veterans to maintain or improve their functionality and optimize their health, independence and quality of life. Financial Benefits (FB): Will provide CF Veterans in rehabilitation with adequate income while recovering from a service-related or career-ending injury and also provide financial assistance if they are unable to work due to their service-related disability. Health Benefits Program: Supports the re-establishment of eligible CF Veterans and their families into civilian life by ensuring that they have access to supplementary health benefits that respond to their needs. Disability Awards (DA) and Death Benefits (DB): Will recognize and compensate CF members and Veterans, and in some cases their survivors and surviving dependent children for the non-economic effects of a service-related disability, including pain and suffering, functional loss and the impairment. Case Management: A coordinated, organized and collaborative process that ensures clients with complex needs access timely and appropriate resources to optimize their level of independence and quality of life.	The Regulations set out the terms and conditions, scope of benefits and services to be provided to eligible clients. The integrated RBAF/RMAF describes the integrated approach that VAC uses to measure, evaluate and report on client and program outcomes. The Performance Measurement Criteria for NVC programs has been developed. Evaluation of the programs is ongoing.	Ongoing quantitative and qualitative indicators for all program components as well as client outcome indicators are currently or will be measured.

Table 8: Details on Project Spending

($ millions)	Current Esti- mated Total Cost	Actual 2004-2005	Actual 2005-2006	2005-2006
				Main Esti- mates	Planned Spending	Total Author- ities	Actual
Ste. Anne's Hospital Reno- vation	114.3	16.3	17.2	23.4	23.4	13.1	11.9
European Monument Restor- ation	30.0	2.9	8.9	9.5	10.5	10.5	9.3
European Monument Restor- ation	144.3	19.2	26.1	32.9	33.9	23.6	21.2

Table 9: Details on Transfer Payments Programs (TPP)

Veterans Affairs Canada manages the following transfer payments programs in excess of $5 million:

($ millions)	2006-2007
Pensions, and Allowances for Disability and Death	1,740.8
Disability Awards and Allowances	50.0
War Veterans Allowance / Civilian War Allowance	18.5
Veterans Independence Program	286.7
Last Post Fund	11.0
Commonwealth War Graves Commission	8.8

For further information on the above-mentioned Transfer Payments Programs can be found at www.tbs-sct.gc.ca/rma/dpr1/06-07/index_e.asp.

Table 10: Financial Statements of Departments and Agencies

Veterans Affairs Canada
Management Responsibility for Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2007 and all information contained in these statements rests with the management of Veterans Affairs Canada. These financial statements have been prepared by management in accordance with Treasury Board Accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

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 fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of Veterans Affairs' financial transactions. Financial information submitted to the Public Accounts of Canada and included in Veterans Affairs' Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal controls designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff; by organizational arrangements that provide appropriate divisions of responsibility; and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout Veterans Affairs.

Veterans Affairs Canada has a Departmental audit committee whose roles are to oversee compliance with legal and regulatory requirements as well as the integrity of financial reporting, internal controls, disclosure controls and internal audit functions. In fulfilling its responsibilities, the audit committee provides advice to assist senior management in risk management and the operation of management control frameworks.

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

Veterans Affairs
Statement of Operations (unaudited)
For the year ended March 31

(in thousands of dollars)	2007	2006
Expenses (Note 4)
Canada Remembers	53,495	59,391
Health care benefits	1,021,674	1,004,838
Pension allowance disability	1,946,695	1,807,131
Veterans Review and Appeal Board	15,223	16,323
Total expenses	3,037,087	2,887,683
Revenues (Note 5)
Canada Remembers	16	19
Health care benefits	18,879	20,349
Pension allowance disability	2,786	3,264
Veterans Review and Appeal Board		1
Total revenues	21,681	23,633
Net cost of operations	3,015,406	2,864,050

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

Veterans Affairs
Statement of Financial Position (unaudited) at March 31

(in thousands of dollars)	2007	2006
Assets
Financial assets
Accounts receivable and advances (Note 6)	11,373	11,026
Non-financial assets
Prepaid expenses	95	22
Tangible capital assets (Note 7)	107,283	88,660
Total assets	118,751	99,708
Liabilities
Accounts payable and accrued liabilities	46,372	47,332
Vacation pay and compensatory leave	10,083	10,119
Deferred revenue	733	684
Other liabilities (Note 8)	13,623	14,042
Employee severance benefits (Note 9)	45,076	42,284
Total liabilities	115,887	114,461
Equity of Canada	2,864	(14,753)
Total	118,751	99,708
Contingent liabilities (Note 10)
Contractual obligations (Note 11)

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

Veterans Affairs
Statement of Equity of Canada (unaudited)
For the year ended March 31

(in thousands of dollars)	2007	2006
Equity of Canada, beginning of year	(14,753)	(45,709)
Net cost of operations	(3,015,406)	(2,864,050)
Current year appropriations used (Note 3)	3,027,967	2,881,436
Revenue not available for spending	(21,979)	(23,599)
Change in net position in the Consolidated Revenue Fund (Note 3)	(5,332)	6,869
Services received without charge from other government departments (Note 12)	32,367	30,300
Equity of Canada, end of year	2,864	(14,753)

The accompanying notes form an integral part of these financial statements

Veterans Affairs
Statement of Cash Flows (unaudited)
For the year ended March 31

(in thousands of dollars)	2007	2006
Operating activities
Net cost of operations	3,015,406	2,864,050
Non-cash items:
Amortization of tangible capital assets	(4,571)	(4,150)
Loss on disposal of tangible capital assets		(164)
Gain on disposal of tangible capital assets		15
Adjustments to tangible capital assets	590	1,051
Services provided without charge	(32,367)	(30,300)
Variations in Statement of Financial Position
(Increase) decrease in accounts receivable and advances	347	(3,664)
(Increase) decrease in prepaid expenses	73	(27)
Increase (decrease) in liabilities	(1,426)	11,607
Cash used for operating activities	2,978,052	2,838,418
Capital investment activities
Acquisitions of tangible capital assets	22,604	26,308
Proceeds from disposal of tangible capital assets		(20)
Cash used for capital investment activities	22,604	26,288
Financing activities
Net cash provided by Government of Canada	3,000,656	2,864,706

The accompanying notes form an integral part of these statements.

Veterans Affairs
Notes to Financial Statements (unaudited)

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 Veterans Review and Appeal Board, which reports 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 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 endeavours to keep alive the achievements and sacrifices made by those who have served Canada in times of war and peace. The Health Care Benefits program provides treatment and other health-related benefits to Veterans and other eligible persons. The Pensions and Allowances for Disability and Death, and Economic Support program provides pensions for disability or death and economic support in the form of allowances to Veterans and other eligible persons. The Veterans Review and Appeal Board program provides Canada's war Veterans, eligible Canadian Forces Veterans and still-serving members, RCMP clients, qualified civilians and their families with full opportunity to request review and appeal hearings to ensure a fair adjudicative process for disability pension, disability awards and War Veterans Allowance claims.

2. Summary of Significant Accounting Policies

These financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations

Veterans Affairs Canada is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to Veterans Affairs Canada do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 to these financial statements provides a high-level reconciliation between the bases of reporting.

(b) 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.

(c) Change in net position in the Consolidated Revenue Fund (CRF) is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by Veterans Affairs Canada. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) 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 Ste. Anne's Hospital for in-patient charges.

(e) Expenses are recorded on the accrual basis:

• Grants are recognized in the year in which the conditions for payment are met.
• Contributions are recognized in the year in which the recipient has fulfilled the terms of a contractual transfer agreement.
• Vacation pay and compensatory leave are expensed as the benefits accrue to 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, and legal services are recorded as operating expenses at their estimated cost.

(f) Disability benefits

The majority of the programs administered by Veterans Affairs Canada are meant to provide future benefits for members and Veterans of the Canadian 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 appropriations.

(g) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan, administered by the Government of Canada. Veterans Affairs Canada contributions to the Plan are charged to expense in the year incurred and represent the total Departmental obligation to the plan. Veterans Affairs Canada is not required to make contributions for any actuarial deficiencies of the Plan.
2. Severance benefits: Employees are entitled to severance benefits, as provided for 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 is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(h) Accounts receivables are stated at amounts expected to be ultimately realized. A provision is made for receivables where recovery is considered uncertain.

(i) 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:

Asset Class	Amortization Period
Buildings	25 years
Works and infrastructure	25 years
Machinery and equipment	5 to 15 years
Informatics	2 to 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

(j) 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. Gain and losses resulting from foreign currency transactions are reported on the Statement of Operations according to the activities to which they relate.

(k) 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 financial statements.

(l) 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 Veterans Affairs Canada becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Department'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 financial statements.

(m) Measurement uncertainty

The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector, 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 severance 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 Appropriations

Veterans Affairs Canada receives funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations 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 appropriations used

(in thousands of dollars)	2007	2006
Net cost of operations	3,015,406	2,864,050
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add(Less):
Services provided without charge	(32,367)	(30,300)
Revenue not available for spending	21,979	23,599
Refund of previous years' expenses	7,727	9,520
Employee severance benefits	(2,792)	(6,051)
Amortization of tangible capital assets	(4,571)	(4,150)
Justice Canada fees	(1,585)	(1,200)
Bad debt expense	(2,697)	(157)
Vacation pay and compensatory leave	37	(1,043)
Loss on disposal of tangible capital assets		(164)
Other	4,113	1,051
	3,005,290	2,855,155
Adjustment for items not affecting net cost of operations but affecting appropriations:
Add(Less):
Acquisition of tangible capital assets	22,604	26,308
Prepaid expenses	73	(27)
	22,677	26,281
Current year appropriations used	3,027,967	2,881,436

(b) Appropriations provided and used

(in thousands of dollars)	Appropriations Provided
	2007	2006
Vote 1 - Operating expenditures	882,315	832,165
Vote 5 - Capital expenditures	23,075	32,351
Vote 10 - Grants and Contributions	2,343,715	1,986,811
Vote 15 - Program expenditures	10,017	9,869
Statutory amounts	39,565	41,056
	3,298,687	2,902,252
Less:
Lapsed appropriations	(270,720)	(20,816)
Current year appropriations used	3,027,967	2,881,436

(c) Reconciliation of net cash provided by Government to current year appropriations used

(in thousands of dollars)	2007	2006
Net cash provided by Government	3,000,656	2,864,706
Revenue not available for spending	21,979	23,599
Change in net position in the Consolidated Revenue Fund
Variation in accounts receivable and advances	(347)	3,664
Variation in accounts payable and accrued liabilities	(960)	(17,727)
Variations in deferred revenue	49	(480)
Other adjustments	6,590	7,674
	5,332	(6,869)
Current year appropriations used	3,027,967	2,881,436

4. Expenses

The following table presents details of expenses by category:

(in thousands of dollars)	2007	2006
Transfer payments
Individuals	2,098,279	1,948,420
Non-profit organizations	13,183	13,817
Other countries and international organizations	8,859	8,685
Other	15	182
Total transfer payments	2,120,336	1,971,104
Operating
Professional and special services	310,588	310,593
Salaries and employee benefits	291,708	288,509
Utilities, materials and supplies	217,658	221,116
Transportation and communications	39,353	43,393
Repairs and maintenance	20,003	19,944
Accommodations	14,700	14,900
Amortization	4,571	4,150
Loss on disposal of tangible capital assets		164
Other	18,170	13,810
Total operating expenses	916,751	916,579
Total expenses	3,037,087	2,887,683

5. Revenues

The following table presents details of revenues by category:

(in thousands of dollars)	2007	2006
Hospital services	17,723	19,411
Meals	362	361
Sale of goods and information products	114	68
Gain on disposal of tangible capital assets		15
Other revenue	3,482	3,778
Total revenues	21,681	23,633

6. Accounts Receivable and Advances

The following table presents details of accounts receivable and advances:

(in thousands of dollars)	2007	2006
Receivables from external parties	18,232	17,963
Receivables from other Federal Government Departments and agencies	4,251	2,977
Advances	952	132
Sub-Total	23,435	21,072
Less: allowance for doubtful accounts on external receivables	(12,062)	(10,046)
Total	11,373	11,026

7. Tangible capital assets

The following tables present details of tangible capital assets:

Cost
(in thousands of dollars) Capital Asset Class	Opening balance	Acquisitions	Disposals and adjustments	Closing Balance
Land	338	274		612
Buildings	66,453			66,453
Works and infrastructure	4,411	6		4,417
Machinery and equipment	3,696	551	(155)	4,092
Informatics	11,685	851	(1,743)	10,793
Motor Vehicles	1,284	68		1,352
Leasehold Improvements	335			335
Assets under construction	60,083	20,854	355	81,292
Total	148,285	22,604	(1,543)	169,346

Accumulated Amortization
(in thousands of dollars) Capital Asset Class	Opening balance	Amortization	Disposals and adjustments	Closing Balance
Land
Buildings	43,587	2,659		46,246
Works and infrastructure	2,686	177		2,863
Machinery and equipment	1,771	839	(206)	2,404
Informatics	10,650	697	(1,927)	9,420
Motor Vehicles	772	157		929
Leasehold Improvements	159	42		201
Assets under construction
Total	59,625	4,571	(2,133)	62,063

Amortization expense for the year ended March 31, 2007 is $4,571
(2006 - $4,150)

Net Book Value
(in thousands of dollars)	2007	2006
Capital Asset Class	Net book value	Net book value
Land	613	338
Buildings	20,208	22,866
Works and infrastructure	1,554	1,725
Machinery and equipment	1,688	1,925
Informatics	1,372	1,035
Motor Vehicles	423	512
Leasehold Improvements	134	176
Assets under construction	81,291	60,083
Total	107,283	88,660

8. 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:

(in thousands of dollars)	Balance April 1, 2006	Receipts and other credits	Payments and other charges	Balance March 31, 2007
Administered accounts	2,224	283	841	1,666
Estate fund	3,574	1,036	25	4,585
Veterans administration and welfare trust fund	561	350	81	830
Returned soldier's insurance fund	17	0	8	9
Veterans insurance fund	7,578	22	1,081	6,519
Other accounts	88	36	110	14
Total	14,042	1,727	2,146	13,623

(a) 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: pensions, war veterans allowances and treatment allowances placed under the administration of the Department of Veterans Affairs; and, benefits from other sources such as Old Age Security, Guaranteed Income Supplement or Canada Pension Plan, placed under administration with the consent of the client. 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 client.

(b) 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.

(c) 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.

(d) Returned soldiers' insurance fund

This fund was established by the Returned Soldiers' Insurance Act, to provide life insurance to contributing Veterans of the First World War. 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 adjustment as at March 31, 2006 of $1,671 was charged to the account during the year and was credited to revenues. The final date on which application for this insurance could have been received was August 31, 1933.

(e) Veterans insurance fund

This fund was established by the Veterans' Insurance Act, to provide life insurance to contributing Veterans of the Second World War. 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, 2006 of $16,194 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.

(f) Other accounts – Shared-cost agreements

This account was established to record transactions relating to share of costs incurred under federal/provincial cost-sharing agreements and funding for research and other projects at Ste. Anne's Hospital.

9. Employee Benefits

(a) Pension benefits

Veterans Affairs Canada employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue 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 Veterans Affairs Canada contribute to the cost of the Plan. The 2006-07 expense amounts to $28,765,351 ($30,089,952 in 2005-06), which represents approximately 2.2 times (2.6 in 2005-06) the contributions by employees.

Veterans Affairs Canada 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.

(b) Severance benefits

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

(in thousands of dollars)	2007	2006
Accrued benefit obligation, beginning of year	42,284	36,233
Expenses for the year	7,334	9,279
Benefits paid during the year	(4,542)	(3,228)
Accrued benefit obligation, end of year	45,076	42,284

10. Contingent liabilities

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the Department is obligated or likely to be obligated to incur such costs. Veterans Affairs Canada has identified approximately four sites (unchanged from March 2006) where such action is thought to be possible. 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 related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by the Department in the year in which they become known.

(b) Claims and litigation

Claims have been made against Veterans Affairs Canada in the normal course of operations. Legal proceedings for claims totalling approximately $428,000,000 (unchanged from 2006) were still pending at March 31, 2007. 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 is accrued and an expense recorded in the financial statements.

The Government is a defendant in a class action lawsuit which claims damages from the alleged failure of the Crown to invest or provide a rate of return on monies administered for the benefits of Veterans. On December 29, 2005, a damage award was ordered by the Ontario Superior Court in the amount of $4.6 billion, effective December 31, 2004. The government appealed and on July 4, 2007, the Ontario Court of Appeal allowed the Crown's appeal, set aside the judgment for damages and dismissed the action. Plaintiff's counsel has announced an intent to seek leave to appeal to the Supreme Court of Canada. No amount has been recorded in the financial statements of the Department given the uncertainty of the outcome.

11. Contractual Obligations

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

(in thousands of dollars)	2008	2009	2010	2011	2012 and thereafter	Total
Ste. Anne's Hospital Modernization Project	20,000	19,000	8,000			47,000
Total	20,000	19,000	8,000			47,000

12. Related party transactions

Veterans Affairs Canada is related as a result of common ownership to all Government of Canada 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. Also, during the year, Veterans Affairs Canada received services which were obtained without charge from other Government departments as presented in part (a).

(a) Services provided without charge:

During the year Veterans Affairs Canada received without charge from other departments, accommodations, legal fees, and the employer's contribution to health and dental insurance plans. These services without charge have been recognized on the Department's Statement of Operations as follows:

(in thousands of dollars)	2007	2006
Accommodations	14,700	14,900
Employer's contribution to the health and dental insurance plans	16,556	14,600
Legal services	1,111	800
Total	32,367	30,300

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include 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 as an expense in Veterans Affairs' Statement of Operations.

(b) Payables and receivables outstanding at year-end with related parties:

(in thousands of dollars)	2007	2006
Accounts payable to other government departments and agencies	9,004	9,383

13. Comparitive information

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

Table 11: Response to Parliamentary Committees, and Audits and Evaluations for FY 2006-2007

Veterans Affairs Canada develops its annual audit and evaluation plan using a risk-based approach. This plan is approved by an Audit and Evaluation Committee, chaired by the Deputy Minister. The intent of the audit and evaluation plan is to ensure that the projects are clearly aligned with VAC's Five-Year Strategic Plan, Program Activity Architecture, and Management Accountability Framework. The Department undertakes audit and evaluation projects in areas that are deemed the highest risks, focussing attention where use of the available resources would best achieve the Department's objectives. The following criteria are considered during project selection: materiality, likelihood, complexity and sensitivity/reputation. During the ranking of the proposed engagements, consultations are held with senior managers, program managers and audit and evaluation staff. Findings and recommendations of previous audits, evaluations and reviews, as well as the extent of follow-up and corrective action taken by management are also used to assess potential projects. Audit schedules are compared with those of the Office of the Auditor General and Veterans Affairs' Sustainable Development Strategy in order to prevent overlapping visits and undue interference with operations. Consultation with partners is conducted on an ongoing basis.

The long range plan attempts to provide some balance, so that a variety of functions, activities and organizational entities are covered annually through cyclical projects (e.g. Financial Management and Control, Residential Care, and Organizational Governance). Follow-up to findings also contribute to current and future year planning. The plan has some flexibility to allow for requests from management for special studies demanded by unforeseeable circumstances, from central agencies for Transfer Policy requirements, and for follow-up reviews on the actions taken on recommendations.

Throughout the year, there are a number of internal audits, evaluations and responses to the Auditor General conducted across the Portfolio. Internal audits are objective examinations of evidence for the purpose of providing an independent assessment of the soundness of risk management strategies and practices, management control frameworks and practices, and information used for decision-making and reporting. Audits and evaluations improve the effectiveness of programs and their delivery in two ways. First, they help managers to design (or improve the design of) policies, programs and initiatives. Second, they provide periodic assessments of policy or program effectiveness and information on impacts (both intended and unintended) and alternative ways of achieving expected results.

In addition to the internal audits and evaluations listed below, Audit and Evaluation is also periodically requested to conduct Management Consults and Reviews. These encompass a variety of studies aimed at providing decision-making information to senior management on selected issues.

Program areas are invited and do respond to all recommendations and observations raised in audit and evaluations through Management Responses and Management Action Plans. The Audit and Evaluation Division (AED) further completes a follow-up process where documentation and other evidence provided is examined to ensure actions within these program areas fully satisfy the recommendations raised. These steps are fulfilled before finally closing off the report.

The Audit and Evaluation Division is also the central point of contact for all Office of the Auditor General (OAG) activities. AED staff manage reporting to the OAG, notify and work with the program areas to develop action plans and respond to any OAG observations or recommendations. This includes reports to Parliament as well as the annual audits of the financial public accounts statements and the sustainable development strategy.

Internal Audits or Evaluations	Completion Date
Organizational Governance Audit/Evaluation Report Volume I - Bureau of Pensions Advocates (BPA) The purpose of the audit/evaluation report was to provide an independent, cyclical assurance that the BPA program and initiatives have the capacity, as shown by organizational performance, to demonstrate and account for results.	July 2006
Administered Accounts – Phase I Assurance Audit The purpose of the audit was to provide management with an independent assessment of VAC's compliance with governing authorities regarding administered accounts.	July 20056
Audit/Evaluation of the Residential Care Program (Ontario Region) The purpose of the review was to identify issues, problems and opportunities associated with VAC's Health Care Program.	July 2006
Evaluation of VIP for Renewal The objective was to assess the program purpose and design, strategic planning, program management and program results and accountability for the purposes of renewing the Terms and Conditions in accordance with the Treasury Board Policy on Transfer Payments.	December 2006
Management of Client and Subject Information Holdings The scope of the assessment included examining the risks, controls and governance processes used by Veterans Affairs in the management of its client and subject information, excluding the examination of financial and human resources information. The objective was to recommend critical high risk areas that may warrant consideration for a future audit and/or evaluation.	December 2006
Audit/Evaluation of the Organizational Governance Volume II Veterans Services (VS) – Atlantic Region The purpose was to provide an independent, cyclical assurance that the VS Atlantic Region's programs and initiatives have the capacity, as shown by organizational performance, to demonstrate and account for results.	December 2006
Ste. Anne's Hospital Modernization Review The purpose of this review was to provide management with a status report of how well VAC is managing this undertaking; a cursory assessment of the managerial and operational controls framework; the information output; and the compliance practices.	December 2006
Internal audits and evaluations can be found on the following Web site: www.vac-acc.gc.ca/general/sub.cfm?source=department/reports/deptaudrep

For additional details, please contact the Director General, Audit and Evaluation at 902-566-8018.

Table 12: Sustainable Development Strategy

In Sustainable Development Strategy (SDS) 2004-2006, there were 83 milestones along four themes: sustaining the health and well-being of our clients; sustaining the health and well-being of our staff; sustaining knowledge and information; and, sustaining government operations. Of these milestones, 54 per cent were achieved or ongoing and 46 per cent were not achieved. Although VAC met with mixed success amongst the themes, many milestones contributed to the success overall of the SDS. Several incomplete milestones were as a result of their interdependency with other milestones. Several of the environmental milestones that were not achieved have been incorporated in the 2007-09 SDS. The results of 2004-06 SDS and the new 2007-09 SDS can be found on the VAC Web site at: www.vac-acc.gc.ca/general/sub.cfm?source3=department/reports#04

Our SDS 2004-2006 offered valuable "lessons learned" for SDS 2007-09. This document, which was tabled in December 2006, has a more manageable number of commitments that follow a more government-wide approach and are in the areas of: federal governance, greenhouse gas emissions, green stewardship, quality of life, regulatory compliance, and waste and water management. Although we are early into this strategy, we have already seen some success in our paper reduction commitment. Printers at Head Office have been set to automatically duplex print. This has resulted in considerable paper savings in some offices. Other initiatives are being implemented throughout the Department to ensure our targets are met.

Although Sustainable Development is not closely tied to the mandate and strategic outcomes of the Department, Veterans Affairs Canada feels the need to do its utmost to protect our environment for future generations.

Table 13: Client-Centred Service

The Government of Canada's Service Improvement Initiative was launched in 2000 with the goal of achieving, from a citizen-centred perspective, a minimum 10 per cent increase in client satisfaction by 2005. In response to this challenge, VAC has conducted three National Client Satisfaction Surveys (2001, 2003 and 2005); issued a revised At Your Service brochure in 2005, which outlined the Portfolio' service standards for most of its programs and services; and, following an analysis of the 2001 National Client Satisfaction Survey results, developed Service Improvement Plans and Compendium of Actions, which guided VAC's service improvement initiatives from 2002 to 2007.

For the three consecutive surveys (2001, 2003 and 2005), the survey questions have remained relatively unchanged. Using the Common Measurements Tool, similar questions are asked which allows us to compare results from year to year. The chart below shows how our clients have rated their overall levels of satisfaction with VAC services over the years:

VAC National Client Satisfaction Surveys	2001	2003	2005
Overall Levels of Satisfaction for All Clients	85%	87%	84%

A fourth National Client Satisfaction Survey is scheduled for fall 2007. During the reporting period, consultations have taken place within the Department regarding the measurement criteria of this survey. Modifications to the survey will allow VAC to conduct more program-specific surveying to capture client satisfaction with specific programs and services offered by VAC and assist VAC in its public performance reporting.

VAC's service standards were initially published in 1995, in its At Your Service brochure. This brochure has undergone two revisions, one in 1998 and one in 2005. The performance against VAC's standards for general service delivery has been measured by using the results of the 2005 National Client Satisfaction Survey. During the past year, VAC began work on a review of the At Your Service brochure with the goal of releasing a revised brochure in 2008. This revision will provide up-to-date service commitments for VAC's major programs and services. Details of the performance against the service standards will be posted on the Department's web site.

On April 3, 2007, in our continuing efforts to improve client service, a Veterans Bill of Rights was created and the office of a Veterans Ombudsman was established.

The Bureau of Pensions Advocates (BPA) is an organization within Veterans Affairs Canada that provides free legal advice and representation to VAC clients who are not satisfied with decisions regarding their disability benefits. The Bureau has 14 District Offices across Canada, each staffed by at least one lawyer, as well as an Appeal Unit in Charlottetown comprised of a team of lawyers.

Last year BPA cleared more than 15,000 cases, up more than 17 per cent from the year before. BPA lawyers continued to set a high standard for client service, despite their heavy workload pressures.

In its ongoing effort to respond to client concerns as they arise, BPA uses a client questionnaire to gauge client satisfaction with the services they receive from lawyers and other BPA staff. In 2006-07, 97 per cent of clients who responded at the Review level said they were satisfied or very satisfied with the advice they received from their lawyer. For Appeal Hearings, 95 per cent responded favourably. When asked to rate their overall satisfaction with BPA's services, 93 per cent responded that they were satisfied or very satisfied.

For the Veterans Review and Appeal Board, 90 per cent of 5,743 review decisions were finalized within an average of 29.2 calendar days, and 90 per cent of 1,271 appeal decisions were finalized within an average of 24.1 calendar days. The Board's service standard is to provide a written decision within 30 days from the hearing date. A total of 310 claims were not finalized within 60 days. Of this number, 183 written communications were sent to appellants to advise them that the decision would be delayed. Decisions on 167 cases were issued shortly after the 60-day time frame.

Supplementary information on Client Centred Service can be found at www.tbs-sct.gc.ca/rma/dpr2/06-07/index_e.asp

Table 14: Travel Policies

The Veterans Affairs Portfolio follows and uses TBS Travel policies parameters.

Table 15: Storage Tanks

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