Financial statements (unaudited) of Royal Canadian Mounted Police for the year ended March 31, 2022

a. Contract and Indigenous Policing

Contract policing is provided through Police Service Agreements which are negotiated between the federal government and provinces, territories, and municipalities. The RCMP currently provides contract policing services to all provinces (except Ontario and Québec), the three territories, and more than 150 municipalities across Canada. The RCMP also provides professional and dedicated service to First Nations and Inuit communities under the terms of the First Nations Policing Program. Contract policing services include the general administration of justice, the preservation of peace, prevention of crime, and fulfilment of all duties as outlined under the laws of Canada or the laws of respective provinces and territories.

b. Federal Policing

Federal Policing addresses the most serious and complex criminal threats to the safety and security of Canadians and Canadian interests including democratic institutions, economic integrity, and physical and cyber infrastructure. Through Federal Policing, the RCMP prevents, detects, and investigates national security, cybercrime, and transnational and serious organized crime, including financial crime. In addition, it enforces federal statutes, conducts international policing activities, and upholds Canada's border integrity and the security of significant government-led events, designated officials and dignitaries.

c. National Police Services

Through National Police Services, the RCMP provides specialized and technical services to all Canadian law enforcement agencies, including: advanced training; national criminal data repositories; firearms regulation and licensing; and investigative tools and services in a variety of fields such as forensics, identification, firearms, and online child exploitation. Internally, the RCMP provides a diverse range of technical services to advance operations and investigations, such as the collection of digital evidence and cybercrime intelligence, the delivery of policing information technology tools, and the implementation of departmental and personnel security standards.

d. Internal Services

Internal Services are those groups of related activities and resources that the federal government considers to be in support of Programs and/or required to meet corporate obligations of an organization. Internal Services refers to the 10 distinct activities and resources that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. These services are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Management Services; Materiel Management Services; and Acquisition Management Services.

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 2021-2022 Departmental Plan. 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 2021-2022 Departmental Plan.

b. Net cash provided by Government

The RCMP operates within the Consolidated Revenue Fund, which is administered by the Receiver General for Canada. All cash received by the RCMP is deposited to the Consolidated Revenue Fund, and all cash disbursements made by the RCMP are paid from the Consolidated Revenue Fund. 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 Consolidated Revenue Fund

Amounts due from or to the Consolidated Revenue Fund are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the Consolidated Revenue Fund. Amounts due from the Consolidated Revenue Fund represent the net amount of cash that the RCMP is entitled to draw from the Consolidated Revenue Fund without further authorities to discharge its liabilities.

d. Revenues

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

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

Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned.

Other revenues are recognized in the period the event giving rise to the revenues occurred.

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

e. Expenses

Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient.

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 carrying value.

f. Employee future benefits

1. Pension benefits for Public Service employees: Eligible employees participate in the Public Service Pension Plan (the "Plan"), a multiemployer pension plan administered by the Government. The RCMP's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. 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.
2. Pension benefits for RCMP members: Members of the RCMP participate in a defined benefit pension plan (the "RCMP Plan") under the Royal Canadian Mounted Police Superannuation Act, which is sponsored by the Government of Canada. The Minister of Public Safety and Emergency Preparedness is the Minister responsible for the Royal Canadian Mounted Police Superannuation Act. The RCMP is responsible for the management of the RCMP Plan, while Public Services and Procurement Canada (PSPC) provides the day-to-day administration of the RCMP Plan. The Office of the Chief Actuary makes periodic actuarial valuations of the RCMP 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 Plan. These contributions are expensed in the year they are credited to the RCMP Plan. This accounting treatment corresponds to the funding provided to departments through Parliamentary authorities.
3. Severance benefits: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits 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. Non-financial assets

The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 13. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collections and Crown land to which no acquisition cost is attributable or intangible assets.

Inventories are valued at cost and are comprised of uniforms and personal equipment, firearms and ammunition, spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.

i. Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in Note 15.

j. Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, the contingent asset is disclosed in Note 15.

k. Environmental liabilities

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the RCMP 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 RCMP's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable and are expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the Government's cost of borrowing, associated with the estimated number of years to complete remediation.

The recorded liabilities are adjusted each year, 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 Note 15.

l. Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes as at March 31, 2022. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the RCMP's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, allowance for vacation pay and compensatory leave, deferred revenue for Contract Policing arrangements on tangible capital assets, accrued salaries and wages at year-end, accrued revenues for Contract Policing 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.

m. Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount. Inter-entity transactions are transactions between commonly controlled entities.

Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

1. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
2. Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

a. Reconciliation of net cost of operations to current year authorities used

b. Authorities provided and used

a. 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 this 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 Royal Canadian Mounted Police Superannuation Act requires that the RCMP Superannuation Account record transactions such as contributions, benefits paid and transfers that pertain to pre-April 1, 2000 service, and that the RCMP Superannuation 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 RCMP Superannuation Account were invested quarterly in a notional portfolio of Government of Canada 20-year bonds held to maturity.

The balances and transactions in the RCMP 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. They are presented here for information only.

b. RCMP Pension Fund account

Pursuant to the Royal Canadian Mounted Police Superannuation Act 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, where the excess of contributions over benefits and administration costs is invested in capital markets by the Public Sector Pension Investment Board. Public Sector Pension Investment Board is a separate Crown Corporation that commenced operations on April 1, 2000. The statutory objectives of Public Sector Pension Investment Board 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 RCMP Pension Fund.

The net amount of contributions less benefits and other payments is regularly transferred to Public Sector Pension Investment Board for investment in capital markets. As at March 31, 2022, the balance in the RCMP Pension Fund Account represents amounts to net contributions in transit awaiting imminent transfer to Public Sector Pension Investment Board.

c. Retirement Compensation Arrangement Account

The Retirement Compensation Arrangement Account records transactions for pension benefits that are provided in excess of those permitted under the Income Tax Act. The Retirement Compensation Arrangement is registered with Canada Revenue Agency and a transfer is made annually between the Retirement Compensation Arrangement Account and the Canada Revenue Agency 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, 2022 the total refundable tax transferred amounts to $35.5 million ($35.6 million in 2021).

The following table provides details of the RCMP Plan accounts:

a. 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 and works pursuant to the contract policing arrangements accommodations program. The revenue is recognized as costs for the construction, purchase and maintenance of buildings are incurred.

b. Donations and bequests

Deferred revenue for donations and bequests represents the balance of contributions received for various specified purposes. The revenue is recognized in the period in which the related expenses are incurred.

c. Firearms licence fees

Deferred revenue for firearms licence fees represents the firearms application fees 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 and the firearms licence has been issued, the fees are recognized as revenue.

The following table provides details of deferred revenue:

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 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and 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 2022 expense amounts to $65.3 million ($67.7 million in 2021). For Group 1 members, the expense represents approximately 1.01 times ($1.01 times in 2021) the employee contributions and, for Group 2 members, approximately 1.00 times ($1.00 times in 2021) 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 Consolidated 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 RCMP Plan. Under the terms of a Service Level Agreement, Public Services and Procurement Canada provides the day-to-day administration of the RCMP Plan, including determining eligibility for benefits and calculating and paying benefits.

Both the members and the RCMP contribute to the cost of the RCMP Plan. The 2022 expense amounts to $401.4 million ($265.7 million in 2021). The $405.2 million of government contribution represents approximately 1.23 times the contributions by members ($1.22 in 2021). The actuarial liability and actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the RCMP Plan's sponsor.

The actuarial liability and related disclosures for these future benefits are presented in the Consolidated 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.

c. Severance benefits

Severance benefits provided to the RCMP's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2022, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

a. Contractual obligations

The nature of the RCMP's activities may result in some large multi-year contracts and obligations whereby the RCMP will be obligated to make future payments in order to carry out its transfer payment programs or when services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

b. Contractual rights

The activities of the RCMP sometimes involve the negotiation of contracts or agreements with outside parties that result in the RCMP having rights to both assets and revenues in the future. They principally involve sales of goods and services. Major contractual rights that will generate revenues in future years and that can be reasonably estimated are summarized as follows:

a. Environmental liabilities

The RCMP has disclosed a contingent liability in the amount of $0.8 million for two sites ($0.8 million in 2021 for two sites) 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 held responsible at some point in the future.

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 $29.7 million ($158.1 million in 2021) as at March 31, 2022.

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 the applicable credit to the contract partner is contingent on the proceeds (if any) from disposal of the asset.

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 at the carrying value 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 other government departments and agencies