Financial Statements (Unaudited) of Royal Canadian Mounted Police for the year ended March 31, 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 Royal Canadian Mounted Police (RCMP). 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 the RCMP's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the RCMP'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 the RCMP and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the RCMP's overall system of internal control is reviewed by the work of internal audit staff, who conduct risk-based audits of different areas of the RCMP's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which reviews the financial statements and provides advice when warranted to the Commissioner.

The financial statements of the RCMP have not been audited.

Ottawa, Canada
August 30, 2016

Statement of Financial Position (Unaudited)

As at March 31, 2016

Contractual obligations (Note 14)

Contingent liabilities (Note 15)

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

Ottawa, Canada
August 30, 2016

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the Year Ended March 31, 2016

Segmented information (Note 18)

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

Statement of Change in Departmental Net Debt (Unaudited)

For the Year Ended March 31, 2016

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

Statement of Cash Flows (Unaudited)

For the Year Ended March 31, 2016

The accompanying notes form an integral part of these 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; 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, as well as 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, such as information sessions on crime prevention, national security, financial crime, and drugs and organized crime, are aimed at reducing victimization of Canadians. This Program ensures the protection of designated persons and security at major events, which in turn mitigates any potential threats to Canada's population. Finally, the Program delivers a high level of technical and operational support to the Canadian law enforcement community. Taken together, these activities ensure the RCMP reaches its overarching goal of reducing criminal activity affecting 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.

International Policing Operations

Under authority of the RCMP Act, this Program furthers Canada's global peace and security agenda by cooperating with and supporting the international law enforcement community, thereby ensuring that both Canadians and the global community are safer. This Program addresses the transnational scope of crime by building relationships with international policing partners and by participating in the INTERPOL global information sharing network. Additionally, the RCMP actively participates in multiple missions abroad in a peacekeeping role and provides support to nations at risk to build their law enforcement capacity.

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.

Transfer Payments

This Program ensures that RCMP employees and their families are provided income security at their pension or in the event of disability or death, and 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 either the terms and conditions of the grant or are statutory payments, for example, the RCMP Pension Continuation Act payments.

2. Summary of Significant Accounting Policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

a) Parliamentary authorities

The RCMP is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the RCMP does not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the "Expenses" and "Revenues" sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future Oriented Statement of Operations included in the 2015-16 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 2015-16 Report on Plans and Priorities.

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

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 RCMP has as 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 RCMP's liabilities. While the deputy head is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

e) Expenses

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 to 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 of Canada. The RCMP's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to 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: Members of the RCMP participate in a defined benefit pension plan under the Royal Canadian Mounted Police Superannuation Act (RCMPSA), which is sponsored by the Government of Canada. The Minister of Public Safety and Emergency Preparedness is the Minister responsible for the RCMPSA. The RCMP is responsible for the management of the Plan while Public Services and Procurement Canada provides the day-to-day administration of the Plan. The Office of the Chief Actuary makes periodic actuarial valuations of the Plan. The RCMP Pension Accounts are the responsibility of the Government and are presented in the Consolidated Financial Statements of the Government of Canada. The RCMP's annual contributions toward the cost of current and prior service are charged to salaries and employee benefits expense in the year incurred. In addition to its regular contributions, current legislation also requires the RCMP 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 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 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

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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

i) Environmental liabilities

Environmental liabilities consist of estimated costs related to the remediation of contaminated sites.

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

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

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

j) Inventory

Inventory consists primarily of uniforms and equipment, firearms, ammunition and parts, and other 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 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:

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

l) Intellectual property

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

m) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, allowance for doubtful accounts 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

The RCMP 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, 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 current year authorities used

(b) Authorities provided and used

4. Accounts payable and accrued liabilities

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

5. RCMP Pension Accounts

The department maintains accounts to record the transactions pertaining to the Royal Canadian Mounted Police Pension Plan (the "Plan"), which comprises the RCMP Superannuation Account, the RCMP Pension Fund Account and the Retirement Compensation Arrangement Account. Details of the RCMP Pension Plan can be found in the RCMP Pension Plan Annual Report and in the Public Accounts of Canada.

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 Royal Canadian Mounted Police Superannuation Act (the "RCMPSA"). 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.

The balances and transactions in the Superannuation Account are not included in the RCMP's Statement of Financial Position as they are the responsibility of the Government of Canada and are presented in the Consolidated Financial Statements of the Government of Canada.

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 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 ("PSPIB"). PSPIB is a separate Crown Corporation that commenced operations on April 1, 2000. The statutory objectives of PSPIB 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 PSPIB 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 PSPIB.

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% refundable tax in respect of the net contributions and interest credits or to be credited a reimbursement based on the net benefit payments. As at March 31, 2016 the total refundable tax transferred (RCMP only) amounts to $33 million ($33 million in 2015).

The following table provides details of the RCMP Pension Plan Accounts. The balances and transactions in the Superannuation Account are not included in the RCMP's Statement of Financial Position but are presented below for information purposes.

6. Environmental liabilities

Remediation of contaminated sites

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

The RCMP has identified a total of 180 sites (188 sites in 2015) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the RCMP has assessed 14 sites (11 sites in 2015) where action is possible and for which a liability of $4,713,148 ($2,874,887 in 2015) has been recorded. This liability estimate has been determined after the sites are assessed and is based on scientific/engineering contractors reviewing the results of site assessments, and proposing possible remediation solutions.

The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2016, and March 31, 2015. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2%. Inflation is included in the undiscounted amount. The Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. The March 2016 rates range from 0.62% for 2 year term to 2.13% for a 25 or greater year term.

In 2016, a statistical model was developed to estimate the liability for unassessed sites based on historical costs incurred for contaminated sites with similar functions. As a result, there are 131 unassessed sites where a liability estimate of $1,706,055 has been recorded prospectively in 2016. This estimate will be refined in future years as sites are assessed and estimated costs are revised.

These two estimates combined ($6,419,203) represent management's best estimate of the amount required to complete the remediation of the sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.

Of the remaining 35 sites, 20 sites were closed as they were either remediated or assessed and found not to be contaminated. One site is considered as high priority for action. Nine sites are considered a medium to low priority based on the low level of risk to human health or the environment of which one site has a contingent liability. Five sites are not considered a priority for action because information indicates there is likely no significant environmental impact or human health threats.

7. 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 programs 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 consists of three categories: deferred revenue for contract policing arrangements on tangible capital assets, deferred revenue for donation and bequest accounts and deferred revenue for registration fees.

Contract policing arrangements on tangible capital assets

Deferred revenue for contract policing agreements (effective April 1, 2012 to March 31, 2032) on tangible capital assets represents the net balance of revenue received in advance of the construction, purchase and maintenance of buildings pursuant to the contract policing arrangements accommodations program. The revenue is recognized as costs for the construction, purchase and maintenance of buildings are incurred.

Donations and bequest

Deferred revenue for donation and bequest accounts represents the balance of contributions received for various purposes. They are recognized as revenue when the funds are expended for the specified purposes.

Firearms registration fees

Deferred revenue for registration fees represents the firearms application fee received from clients where the application processing has not reached a sufficient stage to warrant recognizing revenue. When the application reaches a stage where the eligibility of the applicant has been assessed, the fees are recognized as revenue.

The following table provides details of deferred revenue:

8. Lease obligation for tangible capital assets

The RCMP has entered into agreements to lease buildings under capital lease arrangements with a cost of $30,208,681 and accumulated amortization of $4,357,182 as at March 31, 2016 ($16,264,642 and $3,509,275 respectively as at March 31, 2015). The obligations related to the upcoming years include the following:

9. Employee future benefits

a) Pension benefits (Public Service employees):

The RCMP's public service 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% 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 the RCMP contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to the 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 2015-16 expense amounts to $47 million ($48 million in 2014-15). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-15) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-15) the employee contributions.

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 RCMP is responsible for the overall management of the Plan and Public Services and Procurement Canada (PSPC) provides the day-to-day administration of the Plan. 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 the RCMP presented in these financial statements whereby pension expense corresponds to the RCMP's annual contributions toward the cost of current service.

Both the members and the RCMP contribute to the cost of the Plan. The 2015-16 expense amounts to $267 million ($275 million in 2014-15) and the actuarial adjustment amounts to $86 million ($86 million in 2014-15). The $267 million of government contribution represents approximately 1.4 times the contributions by members (1.6 in 2014-15). The RCMP is responsible for the overall management of the Plan. Under the terms of a Service Level Agreement, PSPC provides the day-to-day administration of the Plan, including determining eligibility for benefits and calculating and paying benefits. 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.

As part of collective agreement negotiations with certain employee groups (Public Service) and changes to conditions of employment for executives and certain non-represented employees (RCMP 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 upon termination of their employment. 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:

10. Other liabilities

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. Receipts of $206,608 ($113,183 in 2014-15) were received in the year and payments of $128,172 ($169,525 in 2014-15) were issued. 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; (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.

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)

11. Accounts receivable and advances

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

12. Inventory

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

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $34,808,000 in 2015-16 ($25,047,000 in 2014-15).

13. Tangible Capital Assets

14. 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. Contractual obligations of $10 million or more that can be reasonably estimated are summarized as follows:

15. 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) Environmental Liabilities

The RCMP has disclosed a contingent liability in the amount of $205,800 for one site ($205,800 in 2015 for one site) where the RCMP has determined that it is not directly responsible, nor does it accept responsibility; however, there is uncertainty as to whether the RCMP may be responsible.

(b) Claims and litigation

Claims have been made against the RCMP in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The RCMP has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $77 million ($78 million in 2014-15) as at March 31, 2016.

(c) Contract policing agreements

The contract policing agreements entitle the contract partner to receive proceeds on the disposal of contract policing assets equivalent to the cost-sharing ratio established by the agreement. While it is likely that a contract policing asset will be disposed of at some point in the future, the amount of the liability cannot be reasonably estimated as payment to the contract partner is contingent on the proceeds (if any) from disposal of the asset.

16. 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. During the year, the RCMP received common services, which were obtained from other government departments as disclosed below.

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

During the year the RCMP received services without charge from certain common service organizations, related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the RCMP'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 payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in the RCMP's Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

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

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

The Government of Canada implemented salary payments in arrears in 2014-15. 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 the RCMP. However, it did result in the use of additional spending authorities by the RCMP. 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.

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 2. The following table presents the expenses incurred and 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:

19. Accounting changes

Removal of the RCMP Superannuation Account

For many years, management had included the balances and transactions of the RCMP Superannuation Account in the RCMP Pension accounts liability on the Statement of Financial Position. A corresponding amount was included in the Due from Consolidated Revenue Fund (CRF) receivable.

Management has determined that these balances and transactions should be removed from the RCMP Statement of Financial Position. The related receivable from the CRF has also been eliminated as the RCMP does not have formal authority to claim the CRF for the amounts. These changes have been applied retroactively and comparative information for 2014-15 has been restated. The impacts of these eliminations on the prior year are summarized in the tables below.

The transactions recorded within the RCMP Superannuation Account continue to be disclosed in Note 5 RCMP Pension accounts for information purposes only. Details of the RCMP Pension Plan can be found in the RCMP Pension Plan Annual Report and in the Public Accounts of Canada.

In addition to these eliminations, the RCMP Dependents Pension Fund Account was moved to Other liabilities to better reflect its nature and Environmental liabilities are presented separately to correspond to the related note.

20. Comparative information

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

Date modified:

2016-11-21